Journal Article

Measuring and Mending Monetary Policy Effectiveness under Capital Account Restrictions: Lessons from Mauritania

Robert Blotevogel

in Journal of African Economies

Volume 23, issue 3, pages 388-422
Published in print June 2014 | ISSN: 0963-8024
Published online February 2014 | e-ISSN: 1464-3723 | DOI: https://dx.doi.org/10.1093/jae/eju004
Measuring and Mending Monetary Policy Effectiveness under Capital Account Restrictions: Lessons from Mauritania

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  • Economywide Country Studies
  • Economic Development
  • Monetary Policy, Central Banking, and the Supply of Money and Credit
  • Money and Interest Rates

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I propose a new approach to identifying exogenous monetary policy shocks in low-income countries with capital account restrictions. In the case of Mauritania, a domestic repatriation requirement is the institutional characteristic that allows me to establish exogeneity. Unlike in advanced countries, I find no evidence for a statistically significant impact of exogenous monetary policy shocks on bank lending. Using a unique bank-level data set on monthly balance sheets of six Mauritanian banks over the period 2006–11, I estimate structural vector autoregressions and two-stage least square panel models to demonstrate the ineffectiveness of monetary policy. Finally, I discuss how a reduction in banks' loan concentration ratios and improvements in the liquidity management framework could make monetary stimuli more effective.

Keywords: E44; E52; E58; O16; O55

Journal Article.  9199 words.  Illustrated.

Subjects: Economywide Country Studies ; Economic Development ; Monetary Policy, Central Banking, and the Supply of Money and Credit ; Money and Interest Rates

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