Monetary Policies in Developing Countries

Topics: Money supply, Monetary policy, Inflation Pages: 102 (31480 words) Published: November 20, 2011
Monetary policies in developing countries

TABLE OF CONTENTS
LIST OF FIGURES3
LIST OF ABBREVIATIONS4
INTRODUCTION5
THE MOTIVATION, IMPORTANCE AND RESEARCH METHODOLOGY8
CHAPTER 1: THEORIES OF MONEY AND ECONOMIC GROWTH10 1.1 MONEY DEMAND AND MONEY SUPPLY WITHIN AN ECONOMY10 1.2 ECONOMIC GROWTH MODELING IN ECONOMIC LITERATURE12 1.3.1 A Harrod-Domar growth model12

1.3.2 The neo-classical growth model13
1.3.3 Money in a neo-classical growth model: the Tobin model13 1.3.4 Problems in the application of neo-classical monetary growth theory to developing countries14 1.3 THEORIES OF MONEY AND MONETARY GROWTH15

1.4.5 The classical view15
1.4.6 The Keynesian theory17
1.4.7 Money and interest rate21
1.4.8 Monetary and fiscal policy23
1.4.9 Special characteristics of developing countries25 1.4 ECONOMIC AND MONETARY EQUILIBRIUM26
CHAPTER 2: MONETARY INSTITUTIONS IN DEVELOPING COUNTRIES28 2.1. THE ROLE OF THE CENTRAL BANK AND THE DEBATE UPON ITS INDEPENDENCE28 2.1.1 The central bank and its functions28

2.1.2 The role of central banks in the economic development of developing countries29 2.1.3 The independence of the central bank29
2.1.4 Central bank independence and inflation in Columbia32 2.2. THE CHANGING PATTERN OF COMMERCIAL BANKING32
2.3. CENTRAL BANKING IN THE “BANK OF ENGLAND GROUP” OF DEVELOPING COUNTRIES35
2.4. MONETARY POLICY TRANSMISSION, RULES AND STRATEGIES36 2.4.1 The transmission mechanism of monetary policy36 2.4.2.1 The transmission mechanism of monetary policy in developing countries38 2.4.2.2 A benchmark model39 2.4.2.3 Monetary policy and the black market exchange rate41 2.4.2 Monetary policy reaction functions42

2.4.3.4 McCallum’s rule42
2.4.3.5 Taylor’s rule43
2.4.3.6 Monetary policy reaction functions in developing countries43 2.4.3 Monetary policy frameworks47
2.4.4.7 Monetary targeting47
2.4.4.8 Inflation targeting48
2.4.4.9 A basic inflation targeting model48 2.4.4.10 Adopting inflation targeting51
CHAPTER 3: DEBT AND CRISES IN DEVELOPING COUNTRIES55
3.1 DEVELOPING COUNTRIES’ BORROWING BEFORE 197356
3.2 DEBT PROBLEMS AFTER 197358
3.3 BENEFITS AND DEFAULT THEORY58
3.4 APPLICATION OF THE MODEL TO THE DEBT CRISIS OF 198261 3.5 MANAGING THE DEBT CRISIS62
3.6 POLICY RESPONSES TO THE DEBT CRISIS OF 198265
3.7 THE IMF’S AND WORLD BANK’S HIPC INITIATIVE69 3.8 FINANCIAL CRISIS IN THE 1990S71
3.9 PREVENTING CRISIS, AND EARLY WARNING SYSTEMS73
CHAPTER 4: THE ROLE OF MONETARY POLICY IN THE CURRENT FINANCIAL CRISIS75 4.1 SCOPE OF THE ANALYSIS AND CHOICE OF VARIABLES75
4.2 SETTING UP THE REGRESSION AND DETERMINATION OF THE COEFFICIENTS79 4.3 TESTING THE MODEL FOR ALL THE COUNTRIES IN THE DATABASE84 CONCLUSION92
BIBLIOGRAPHY93

LIST OF FIGURES

Figure 1: Employment and the real wage17
Figure 2: (a) Savings and investment; (b) Aggregate demand20
Figure 3: The money supply, prices and output21
Figure 4: Money demand and supply in the Keynesian framework (1)23
Figure 5: Money demand and supply in the Keynesian framework (2)24
Figure 6: Monetary and fiscal policy (1)25
Figure 7: Monetary and fiscal policies (2)25
Figure 8: Equilibrium interest...

Bibliography: 2) Basu, S &Ghosh, A. (1974) A review of Current Banking Theory and Practice, 2nd edition. London:Macmillan.
3) Bernake, B., Laubach, T., Mishkin, F. & Posen, A. (1999) Inflation Targeting: Lessons from the International Experience. Princeton: Princeton University Press.
4) Bernake, B. & Woodford, M. (2004) The Inflation Targeting Debate. Chicago: University of Chicago Press.
5) Blinder, A. (1999) Central Banking in Theory and Practice. Cambridge: MIT Press.
6) Claassen, E. (1991)Exchange rate policies in developing and post-socialist countries. San Francisco: ICS Press.
7) Coats, W. &Khatkhate, D. (1980) Money and monetary policy in less developed countries.Oxford: Pergamon.
8) Cukierman, A. (1992) Central Bank Strategy, Credibility and Independence. Cambridge: MIT Press.
9) Fraga, A., Goldgajn, I. &Minella, A. (2004) Inflation Targeting in Emerging Market Economies. NBER Macroenomics Annual 2003. Cambridge : MIT Press, 365-400.
10) Friedman, M. &Schwarts, A. (1963) A Monetary History of the United States, 1867-1960. Princeton: Princeton University Press.
11) Fielding, D. (2005) Macroeconomic Policy in the Fran Zone. Basingtoke: Palgrave Macmillan.
12) Fry, M., Goodhart, C. & Almeida, A. (1996) Central Banking in Developing Countries: Objectives, Activities and Independence. London: Routledge.
13) Giavazzi, F., Goldgajn, I. & Herrera, S. (2005) Inflation Targeting, Debt and the Brazilian Experience, 1999-2003. Cambridge: MIT Press.
14) Ghatak, S. & Sanchez-Fung, J. (2007) Monetary economics in developing countries, third edition. New York: Palgrave Macmillan Ltd.
15) Jha, R. (1994) Macroeconomics for developing countries. London: Routledge.
16) Johnson, H. (1966-1967) Money in a Neo-Classical One Sector Growth Model. Selected Essays in Monetary Economics. London: George Allen &Unwin.
17) Lewis, M. &Mitzen, P. (2000) Monetary Economics. Oxford: Oxford University Press.
18) Mas-Colell, A. (1985) The Theory of General Economic Equilibrium: a differential approach. Cambridge: Cambridge University Press.
19) McKinnon, R. (1973) Money and Capital in Economic Development. Washington, DC: The Brookings Institutions.
20) Myint, H. (1980)The economics of the developing countries, 5th edition. London: Hutchison.
21) Page, S. (1993) Monetary policy in developing countries. London: Routledge.
22) Reserve Bank of India (1979) Report on Annual Currency and Finance. Bombay: Reserve Bank of India.
23) Schuller, K. (1996) Should developing countries have central banks? London: The Institution of Economic Affair.
24) Shaw, E. (1973) Financial Deepening in Economic Development. Oxford: Oxford University Press.
25) Suranovic, S. (2010) International Finance: Theory and Policy. Hampshire: Palgrave Macmillan Ltd.
26) Sikorski. M. (1996)Financial liberalization in developing countries. Cheltenham: Edward Elgar.
27) Sodersten, B. (1993) International economics. London: Macmillan.
28) Taylor, L. (1983) Structuralist Macroeconomics. New York: Basic Books.
29) Taylor, J.B. (1993) Discretion Versus Policy Rules in Practice. Carnegie Rochester Conference Series on Public Policy 39:195-214.
30) Taylor, J.B. (1999) Monetary Policy Rules. Chicago: University of Chicago Press.
31) Thirlwall, A. (2004) Trade, the balance of payments and exchange rate policy in developing countries. Cheltenham: Edward Elgar.
32) Zhang, W. (2008) Monetary Growth Theory: Money, Interest, Prices, Capital, Knowledge and Economic Structure over Time and Space. London: Routledge.
33) Woodford, M. (2003) Interest and Prices: Foundation of a Theory of Monetary Policy. Princeton: Princeton University Press.
35) Aghion, P., Bacchetta, P. & Banerjee, A. (2000) A Simple Model of Monetary Policy and Currency Crises. European Economic Review 44:728-38.
36) Alesina, A. & Summers, L. (1993) Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence. Journal of Money, Credit, and Banking 25:151-62.
37) Ball, L., Mankiw, N. & Ricardo, R. (2005) Monetary Policy for Inattentive Economies. Journal of Monetary Economics 52:703-25.
38) Barro, R. & Gordon, D. (1983) A Positive Theory of Monetary Policy in a Natural-rate Model. Journal of Political Economy 91:589-610.
39) Bernake, B. & Blinder, A. (1992) The Federal Funds Rate and the Channels of Monetary Transmission. American Economic Review 82:901-21.
40) Bhattacharya , R. (1974) Demand and Supply of Money in a Developing Economy: A Structural Analysis for India. Review of Economics and Statistics 56:502-10.
41) Bird, G. (1992) Ten Years Older and Deeper in Dept. Economics XXVIII: 19-26.
42) Carare, A. & Stone, M. (2006) Inflation Targeting Regimes. European Economic Review 50:379-408.
43) Calvo, G & Reinhart, C.( 2002) Fear of Floating. Quarterly Journal of Economics: 117:379-408.
44) Clarida, R., Gali, J. &Gertler, M. (1998) Monetary Policy Rules in Practice: Some International Evidence. European Economic Review 42:1033-67.
45) Clarida, R. &Gertler, M. (1999) The Science of Monetary Policy: A new Keynesian Perspective. Journal of Economic Literature 37:1661-707
46) Carpenter, S
47) Cukierman, A. , Web, S. &Neyapti, B. (1992) Central Bank Independence and Its Effect and Policy Outcomes. World Bank Economic Review 6:353-98.
48) deHaan, J. &Kooi, W. (2000) Does Central Bank Independence Really Matter? New Evidence For Developing Countries Using a New Indicator. Journal of Banking and Finance 24:643-64.
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • The Federal Reserve and Monetary Policy Essay
  • The Economy, Monetary Policy, and Monopolies Essay
  • monetary policy Essay
  • Unemployment and Monetary Policy Essay
  • Monetary/Fiscal Policy Essay
  • Essay about Nigerian Monetary Policy
  • Uk Monetary Policy Research Paper
  • Essay about Economics and Monetary Policy

Become a StudyMode Member

Sign Up - It's Free