Uncovering Monetary Transmission Mechanisms in Low-Income Countries

Event | 8 August 2016
ADBI, Tokyo, Japan

Purpose

ADBI’s Seminar Series brings eminent persons to ADBI to encourage debate among policy makers, researchers, academics, think tanks, and other audiences interested in economic development challenges in Asia and the Pacific.

Background

Grace Li is an economist in the International Monetary Fund’s (IMF’s) research department. Her interests include applied macroeconomics, finance, and international finance. Her work has been published in economics journals and edited volumes. Her recent study on current account norms and natural resource cycles was published in the Journal of Development Economics. She is also examining capital flows, the housing market, credit cycles, and development issues. Previously, she worked on the IMF United States and Canada desks covering the monetary and external sectors for both economies. Ms. Li holds MA and PhD degrees from the University of Chicago.

Objectives

Recent studies using Vector Autoregressive (VAR) Models tend to find that monetary policy instruments have small and imprecisely estimated impacts in low-income countries (LICs). Is this because the monetary transmission mechanism is weak or because VAR-based methods are not capable of measuring the strength of the transmission accurately in the LIC environment? The stakes here seem high. If the transmission mechanism is weak, this suggests challenges to successful monetary policies in LICs. If instead the VAR methods are weak, then results about the seeming weakness of the transmission mechanism should be discounted by policy makers. This seminar will attempt to help distinguish between these two competing explanations of the “weak” monetary policy transmission mechanism in developing countries.

Participants

About 20 policy makers, academics, outside researchers, and the public.

Output

The presentation shows that monetary policy instruments have small and imprecisely estimated impacts in low-income countries. This seminar introduces two competing explanations of the “weak” monetary policy transmission mechanism in developing countries.

Language

English

Time of event

12:00 – 13:00