 Financial Development and Monetary Policy Efficiency: Unraveling the Empirical Contradiction and Discovering the True RelationMahmood Rahman ()
Economics Bulletin, 2018, vol. 38, issue 1, 281-296 Abstract: Considering the contradicting findings and inadequate theoretical framework, this paper re-investigates the relationship between financial development and monetary policy effectiveness utilizing panel data from 40 economies, covering the time-span 1992-2014.This research shows that the influence of monetary policy in conjunction with financial development on output growth and inflation tends to be positive and negative, respectively, although quite meager in magnitude, where the System GMM for the combined data set is thought to be the more appropriate estimation technique as it addresses the endogeneity problem. It implies that financial development enhances monetary policy effectiveness. As monetary expansion, combined with financial development can cause sustainable growth, so, financial development is instrumental in policy effectiveness and consequently, must be considered meticulously for appropriate monetary policy formulation. Expansionary monetary policy could be more effective in the developed economies for output expansion and influence inflation more in the developing world. Keywords: monetary policy effectiveness; financial development; economic growth (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-17-00479 Access Statistics for this article More articles in Economics Bulletin from AccessEcon |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.