Monetary Policy Transmission Mechanisms in Pacific Island Countries

WPIEA2011096 Image
Price:  $18.00

Author/Editor: Jonathan C Dunn, Matt Davies, Yongzheng Yang, Yiqun Wu, Shengzu Wang
Release Date: © April, 2011
ISBN : 978-1-45525-427-9
Stock #: WPIEA2011096
Stock Status: On back-order

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During the global financial crisis, central banks in Pacific island countries eased monetary policy to stimulate economic activity. Judging by the ensuing movements in commercial bank interest rates and private sector credit, monetary policy transmission appears to be weak. This is confirmed by an empirical examination of interest rate pass-through and credit growth. Weak credit demand and underdeveloped financial markets seem to have limited the effectiveness of monetary policy, but the inflexibility of exchange rates and rising real interest rates have also served to frustrate the central banks’ efforts despite a supporting fiscal policy. While highlighting the importance of developing domestic financial markets in the long run, this experience also points to the need to coordinate macroeconomic policies and to use all macroeconomic tools available in conducting countercyclical policies, including exchange rate flexibility.


Banks and banking , Central banks , Demand , Economic development , Economic policy , Financial institutions and markets , Fiscal policy , Monetary policy

More publications in this series: Working Papers

More publications by: Jonathan C Dunn ; Matt Davies ; Yongzheng Yang ; Yiqun Wu ; Shengzu Wang