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Monetary Transmission in Low Income Countries

Peter Montiel, Antonio Spilimbergo () and Prachi Mishra

No 10/223, IMF Working Papers from International Monetary Fund

Abstract: This paper reviews monetary transmission mechanisms in low-income countries (LICs) to identify aspects of the channels that may operate differently in LICs relative to advanced and emerging economies. Given the weak institutional frameworks, reduced role of securities markets, imperfect competition in the banking sector and the resulting high cost of bank lending to private firms, the traditional channels (interest rate, bank lending, and asset price) are impaired in LICs. The exchange rate channel is also undermined by central bank intervention in the foreign exchange market. These conclusions are supported by review of the institutional frameworks, statistical analysis, and previous literature.

Keywords: Exchange rates; Financial institutions; Financial intermediation; Asset prices; Banking sector; Banks; Cross country analysis; Central bank policy; Monetary policy; Monetary transmission mechanism; Low-income developing countries; Loans; Securities markets; exchange rate, interest rate, institutions, bank lending, monetary transmission, central bank, government securities, Macroeconomic Analyses of Economic Development, (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-mon
Date: 2010-10-01
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Related works:
Working Paper: Monetary transmission in low income countries (2010) Downloads
Working Paper: Monetary transmission in low income countries (2010) Downloads
Working Paper: Monetary transmission in low income countries (2010) Downloads
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