Monetary policy transmission and macroeconomic policy coordination in Pacific island countries

Yang, Yongzheng; Davies, Matt; Wang, Shengzu; Dunn, Jonathan; Wu, Yiqun

doi:10.1111/j.1467-8411.2012.01333.x

Cited by 3 publications

(4 citation statements)

References 16 publications

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“…Yang, Davies, Wang, Dunn, and Wu (2012) have commented that monetary policy transmission appears to be weak in Pacific Island countries during the global financial crisis. According to them, underdeveloped financial markets and low credit demand have made monetary policy ineffective.…”

Section: The Effectiveness Of Monetary Policy: a Review Of Empirical mentioning

confidence: 99%

Monetary Policy, Trade Openness and Economic Growth in India Under Monetary-targeting and Multiple-indicator Approach Regimes

Hossain

Maitra

2019

Arthaniti: Journal of Economic Theory and Practice

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This article examines the role of monetary policy and trade openness to raise income in India for the monetary-targeting regime and the multiple-indicator approach regime of monetary policy. The impact of the key instruments of monetary policy, namely, money supply, interest rate and exchange rate, with trade openness on income, is assessed. Besides, how interest rate responds to monetary instruments, income and trade openness is studied. Empirical analysis finds a significant positive impact of the broad money supply, both in the short run and the long run, along with a negative long-run impact of the real interest rate and a positive impact of the real effective exchange rate in the variations of income. On the other hand, trade openness contributes to a rise in income in the short run, while its impact on the long run is negative. The interest rate has also responded to policy instruments, income and openness which indicates that the monetary policy is effective over the two monetary regimes.

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Section: The Effectiveness Of Monetary Policy: a Review Of Empirical mentioning

confidence: 99%

Monetary Policy, Trade Openness and Economic Growth in India Under Monetary-targeting and Multiple-indicator Approach Regimes

Hossain

Maitra

2019

Arthaniti: Journal of Economic Theory and Practice

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“…In a more 'business as usual' scenario, Weber (2005) notes, for the case of Cabo Verde, that this regime leads to persistent high-interest rates that detract from domestic investment and economic growth. On the other hand, the lower capital inflows attracted by these kinds of economies allow them to enjoy a certain degree of freedom under a fixed exchange regime (Yang et al, 2012).…”

Section: Monetary Policy On Small Islandsmentioning

confidence: 99%

“…This entails, for instance, that rather than the interest rate, both the money and the exchange rate emerge as the main channel of monetary policy to affect the real economy (Jayaraman and Dahalan, 2008; Ramlogan, 2004). Unsurprisingly, many small islands have historically opted for fixed or managed exchange rate regimes (IMF, 2019; Jayaraman and Choong, 2010; Yang et al, 2012). Rodriguez-Fuentes (2017) goes a step further and argues that, given the aforementioned circumstances, Caribbean islands are ‘incapable’ of conducting their own monetary policy.…”

Section: Literature Reviewmentioning

confidence: 99%

Monetary policy and exchange rate regime in tourist islands

Inchausti-Sintes

Pérez-Granja

2020

Tourism Economics

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The broad impact of the travel industry on economies has been comprehensively analysed in the tourism literature. Despite this, its consequences for monetary policy have remained unaddressed. This article aims at providing a first approach in this line for the case of three small tourist islands such as Cabo Verde, Mauritius and Seychelles. The research is based on a Bayesian estimation using a dynamic stochastic general equilibrium model (DSGE), and the optimal response to a tourism demand shock of four monetary policies is analysed. According to the results, both a conventional peg and an inflation-targeting policies achieve better economic performance. More precisely, the inflation is lower in the former. However, the rise in consumption and the gain in the external competitiveness are sharper in the latter. Finally, the other two policies, an inflation-targeting with managed exchange rate policy and an imported-inflation targeting policies, generate higher consumption and external competitiveness, but, also higher inflation and interest rate.

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“…For studies on PICs in general, Yang et al (2012) found that interest rates and private sector credit channels of monetary policy transmission appear to be weak for the region, where weak credit demand and underdeveloped financial markets seem to have limited the effectiveness of monetary policy. Peiris and Ding (2012) showed that PICs are vulnerable to commodity price shocks, which poses challenges for monetary policy, given a high degree of exchange rate pass-through to inflation.…”

Section: Introductionmentioning

confidence: 99%

Does the Money Multiplier Hold in Pacific Island Countries? The Case of Papua New Guinea

Ofoi

Sharma

2021

JRFM

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This is the first study to systematically assess the significance of the standard money multiplier vis-à-vis the bank credit transmission channel in the case of Pacific Island Economies, focusing on Papua New Guinea. The vector autoregressive model comprising six variables—interest rate, inflation rate, loans, deposits, reserve money, and real output—was estimated using quarterly data for the period 1980q1 to 2017q4. We applied the ordinary least squares (OLS) method to estimate the system of vector autoregressions (VARs). The estimation was conducted for the full and sub-sample periods. From the impulse response functions generated, the results suggest that the money multiplier does not hold and that the transmission to bank credit appears weak. It seems that the ability of the Central Bank to make loanable funds available through its conduct of monetary policy may not enhance private sector credit. On the other hand, there appears to be a significant and positive association between bank deposits and credit, suggesting that bank deposits and credit are endogenous and demand driven.

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Monetary policy transmission and macroeconomic policy coordination in Pacific island countries

Cited by 3 publications

References 16 publications

Monetary Policy, Trade Openness and Economic Growth in India Under Monetary-targeting and Multiple-indicator Approach Regimes

Monetary Policy, Trade Openness and Economic Growth in India Under Monetary-targeting and Multiple-indicator Approach Regimes

Monetary policy and exchange rate regime in tourist islands

Does the Money Multiplier Hold in Pacific Island Countries? The Case of Papua New Guinea

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