Monetary Policies in Developing Countries

Only available on StudyMode
  • Download(s) : 323
  • Published : November 20, 2011
Open Document
Text Preview
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...
tracking img