Channels of Monetary Transmission in the CIS

Jamilov, Rustam (2012): Channels of Monetary Transmission in the CIS.

Abstract

Twenty years have passed since the breakdown of the Soviet Union, and it is time to draw a concluding line for monetary policy efficiency in the Commonwealth of Independent States (CIS). We propose a comprehensive treatment of the subject for nine members of the CIS for the period of 2000-2009. Four transmission channels are investigated: interest rate channel, exchange rate channel, bank lending channel, and monetary channel. First, we design a VAR framework for each CIS member-state and investigate the short-run dynamics of the impact of each of the four transmission channels on domestic output and inflation. Second, we construct Auto Regressive Distributed Lag Models (ARDL) in order to study the country-wise efficiency of transmission channels in the long run. Finally, we employ a panel data fixed effects method to show how the CIS behaves as a region. Our short-run individual country analysis yields highly heterogeneous results. In the long run, however, it’s apparent that broad monetary base (M2) is the most influential determinant of aggregate output. Inflation is affected the most by the refinancing rate and the flow of remittances. For both output and inflation, exchange rate plays a role of a supporting channel.

• Item Type: MPRA Paper
• Language: English
• Keywords: CIS; Monetary Transmission; VAR; ARDL Cointegration; Panel Data
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O53 - Asia including Middle East; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E40 - General

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