Do the Keynesian monetary transmission mechanisms work in the MENA region?

Sanchita Mukherjee () and Rina Bhattacharya ()

Empirical Economics, 2015, vol. 48, issue 3, 969-982

Abstract: In this article, we empirically examine the operation of the traditional Keynesian interest rate channel of the monetary policy transmission mechanism in five emerging economies in the Middle East and North Africa (MENA) region and compare it with 14 inflation targeting (IT) emerging market economies (EMEs) using dynamic panel data analysis. Contrary to some existing studies, our empirical results provide no support for the argument that the traditional Keynesian interest rate channel is weak or does not operate effectively in the MENA region: both private consumption and investment in the MENA EMEs are sensitive to movements in real interest rates (although, in the case of private consumption, not independently of the level of financial development). We also find that interest rate elasticities of private consumption and private investment vary significantly with the level of development of the domestic financial market in the MENA EMES comparable to that in IT countries. Finally, our findings suggest that liberalization of the capital account has a significantly positive impact on private sector demand in MENA EMEs similar to that in the IT EMEs. Copyright Springer-Verlag Berlin Heidelberg 2015

Keywords: Monetary transmission; Private consumption; Private investment; Interest rate elasticity; Financial market development; Capital openness; E21; E42; E44; E52; F41; F42 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1007/s00181-014-0824-8 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:empeco:v:48:y:2015:i:3:p:969-982

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

DOI: 10.1007/s00181-014-0824-8

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().