Governance, Financial Development and Monetary Policy Transmission: Empirical Evidence from Lower and Upper Middle-Income Countries

Ibtissem Issaoui

MPRA Paper from University Library of Munich, Germany

Abstract: Using a panel ARDL model, this study evaluated the long and short relationships between domestic credit, governance indicator quality, and finance development indicators. The results showed that better governance improves monetary policy transmission over the long term for the majority of specifications. Furthermore, finance development has a positive and significant impact. However, the results imply that the impact of central bank monetary policy on credit to the private sector is unclear for the vast majority of estimated specifications. This confirms that the bank credit channel models of Bernanke and Blinder (1988) fail to explain how monetary policy is transmitted in low- and middle-income countries.

Keywords: Monetary policy transmission; governance; financial development; institu- tional quality; panel ARDL; emerging economies. (search for similar items in EconPapers)
JEL-codes: E52 E58 G21 O16 O43 (search for similar items in EconPapers)
Date: 2022-10-16
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:127470

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