Monetary policy, at least in part, operates through both an interest rate and credit channel. The question arises, therefore, whether monetary policy is a less potent a device in affecting output and inflation in countries that have low levels of credit and where investment and consumption are...

This note discusses the implications of the price shocks for the balance of payments of low-income countries in sub-Saharan Africa. The response by bilateral donors and multilateral institutions will, in practice, need to be country-specific. To this end, the note identifies a list of 18...

This paper extends the basic monetary model that underlies the monetary approach to the balance of payments to allow for the endogenous determination of the short-run growth rate of the economy. In the extended model domestic credit expansion affects not only the balance of payments but also the...

It is well known that in a small open economy where there is perfect substitutability between domestic and foreign assets and costless portfolio adjustment, the monetary authorities cannot control the money supply, but can influence the balance of payments through the use of domestic credit. It...

The paper presents a DGE model designed as a core projection tool to support monetary policy in inflation-targeting (IT) emerging market economies. The paper uses a particularly simple and flexible general equilibrium model structure that can be amended to account for various phenomena that...

These Technical Notes on France explain integration of global financial markets. The stress tests for the France Financial Sector Assessment Program (FSAP) were designed to yield as comprehensive and detailed a picture as possible within the constraints of the approach. Retail activity by...

In recent years a number of countries have undertaken far-reaching reforms of their financial sectors. Generally speaking, financial sector reforms aim at achieving greater flexibility of interest rates, an enhanced role for market forces in credit allocation, increased independence for the...

This paper reviews empirical evidence on the operation of the monetary transmission mechanism based on targeting of interest rates on indexed assets in the Chilean economy. The empirical evidence has two policy implications. First, interest rates on indexed assets do not fully reflect real...

Over the past decade policy makers in Latin America have adopted a number of macroprudential instruments to manage the procyclicality of bank credit dynamics to the private sector and contain systemic risk. Reserve requirements, in particular, have been actively employed. Despite their...