This paper sets out to investigate the process through which monetary policy affects economic activity in Malawi. Using innovation accounting in a structural vector autoregressive model, it is established that monetary authorities in Malawi employ hybrid operating procedures and pursue both price stability and high growth and employment objectives. Two operating targets of monetary policy are identified, viz., bank rate and reserve money, and it is demonstrated that the former is a more effective measure of monetary policy than the latter. The study also illustrates that bank lending, exchange rates and aggregate money supply contain important additional information in the transmission process of monetary policy shocks in Malawi. Furthermore, it is shown that the floatation of the Malawi Kwacha in February 1994 had considerable effects on the country's monetary transmission process. In the post-1994 period, the role of exchange rates became more conspicuous than before although its impact was weakened, and the importance of aggregate money supply and bank lending in transmitting monetary policy impulses was enhanced. Overall, the monetary transmission process evolved from a weak, blurred process to a somewhat strong, less ambiguous mechanism.

This paper investigates factors that determine child malnutrition in Malawi. Measuring child nutrition using anthropometric measures, the study finds that child malnutrition worsens with age until a certain critical age beyond which it starts to improve and that boys are more at risk than girls. We also find evidence that child malnutrition is more prevalent in children that fall sick regularly and in households that draw water from a well, protected or not. In addition, children who come from households that have mother/female household heads who are economically empowered, in terms of being in salaried employment or working in a family business, tend to be better nourished. Copyright (c) 2008 The Authors. Journal compilation (c) 2008 Economic Society of South Africa.

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The primary objective of this paper is to investigate the interaction of formal and informal …nancial markets and their impact on economic activity in quasi-emerging market economies (QEMEs). Using a four-sector dynamic stochastic general equilibrium (DSGE) model, we demonstrate that formal and informal …nancial sector loans are complementary in the aggregate, suggesting that an increase in the use of formal …nancial sector (FFS) credit creates additional productive capacity that requires more informal …nancial sector (IFS) credit to maintain equilibrium. Our model also demonstrates that the response of FFS loans to a positive production technology shock is sensitive to the rate of success for high risk borrowers while the response of IFS loans is not. We further show that interest rates in the IFS may not necessarily be driven by FFS interest rates, with the implication that the impact of monetary policy on economic activity may partly be o¤set by IFS interest rates.

This paper aims at empirically investigating the role of moral hazard in the e¢ ctivity of deposit insurance in achieving banking stability. If the negative e¤ect of deposit insurance on banking stability is through moral hazard, then deposit insurance will be associated with banking insolvency and credit crunch more than with bank runs. To test this hypothesis, we compute measures of these two types of banking instability. We …nd that deposit insurance per se has no signi…cant e¤ect either on bank insolvency and credit crunch or on bank runs. However, when the deposit insurance is coupled with an increase in credit to private sector, it has a positive and signi…cant e¤ect on bank insolvency and credit crunch but not on bank runs.