Relative Importance of Monetary Transmission Mechanism in Sri Lanka: An Empirical Investigation

Sooriyakumar Krishnapillai, Vairavipillai pasupathy Sivanathan () and Anushiya Sireeranhan ()
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Vairavipillai pasupathy Sivanathan: University of Jaffna
Anushiya Sireeranhan: University of Jaffna

Economics Bulletin, 2016, vol. 36, issue 1, 560-568

Abstract: This paper studies various monetary transmission channels in Sri Lanka to identify the more effective transmission mechanism and the policy rate that signals changes in monetary policy more effectively. The standard recursive Structural Vector Autoregression (SVAR) models are used to analyze monetary transmission mechanism. Impulse response of output to a one standard deviation positive shock in reserve money indicates that credit channel is more effective transmission channel than interest rate and exchange rate channel in Sri Lanka and repo rate is the policy rate that signals the changes in monetary policy more effectively.

Keywords: Monetary transmission mechanism; Structural Vector Auto Regression; Impulse response (search for similar items in EconPapers)
JEL-codes: E0 E5 (search for similar items in EconPapers)
Date: 2016-03-24
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