Measuring and Mending Monetary Policy Effectiveness Under Capital Account Restrictions: Lessons from Mauritania
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Summary:
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 key 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 dataset 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.
Series:
Working Paper No. 2013/077
Subject:
Agroindustries Bank credit Banking Credit Economic sectors Exports Financial institutions International trade Loans Money
English
Publication Date:
March 27, 2013
ISBN/ISSN:
9781484328682/1018-5941
Stock No:
WPIEA2013077
Pages:
35
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