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LOST IN TRANSMISSION? THE EFFECTIVENESS OF MONETARY POLICY TRANSMISSION CHANNELS IN THE GCC COUNTRIES

Serhan Cevik () and Katerina Teksoz ()
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Katerina Teksoz: Columbia University, 405 Low Library, MC 4335, New York, NY 10027, USA

Middle East Development Journal (MEDJ), 2013, vol. 05, issue 03, 1-21

Abstract: This paper empirically investigates the effectiveness of monetary policy transmission in the Gulf Cooperation Council (GCC) countries using a structural vector autoregressive model. The originality and significance of the paper are in constructing and analyzing "synthetic" aggregate variables for the GCC as a whole. The results indicate that the interest rate and bank lending channels are relatively effective in influencing non-hydrocarbon output and consumer prices, while the exchange rate channel does not appear to play an important role as a monetary transmission mechanism because of the pegged exchange rate regimes. The empirical analysis suggests that policy measures and structural reforms — strengthening financial intermediation and facilitating the development of liquid domestic capital markets — would advance the effectiveness of monetary transmission mechanisms in the GCC countries.

Keywords: Monetary policy transmission; inflation; credit channel; structural VAR (search for similar items in EconPapers)
Date: 2013
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Working Paper: Lost in Transmission? The Effectiveness of Monetary Policy Transmission Channels in the GCC Countries (2012) Downloads
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DOI: 10.1142/S1793812013500181

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