Measuring and Mending Monetary Policy Effectiveness under Capital Account Restrictions: Lessons from Mauritania

Robert Blotevogel

Journal of African Economies, 2014, vol. 23, issue 3, 388-422

Abstract: I propose a new approach to identifying exogenous monetary policy shocks in low-income countries with capital account restrictions. In the case of Mauritania, a domestic repatriation requirement is the institutional characteristic that allows me to establish exogeneity. Unlike in advanced countries, I find no evidence for a statistically significant impact of exogenous monetary policy shocks on bank lending. Using a unique bank-level data set on monthly balance sheets of six Mauritanian banks over the period 2006–11, I estimate structural vector autoregressions and two-stage least square panel models to demonstrate the ineffectiveness of monetary policy. Finally, I discuss how a reduction in banks' loan concentration ratios and improvements in the liquidity management framework could make monetary stimuli more effective.

Date: 2014
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