Monetary Transmission Mechanism in Sri Lanka: A Comprehensive Assessment with New Evidence

Perera, Anil

doi:10.4038/ss.v43i1-2.4690

Cited by 7 publications

(6 citation statements)

References 111 publications

(179 reference statements)

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“…Tang (2006) also found that the interest rate is important in influencing both output and inflation. This was consistent with Srithilat and Sun (2017) and Perera (2016). However, Ufoeze (2018) found that the monetary policy rate and the interest rate have an insignificant positive relationship on economic growth.…”

Section: Literature Reviewsupporting

confidence: 92%

The Impacts of Monetary and Fiscal Policies on Economic Growth in Malaysia, Singapore and Thailand

Tan

Azali

Habibullah

et al. 2020

South Asian Journal of Macroeconomics and Public Finance

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This article analyses the impact of monetary and fiscal policies on economic growth in Malaysia, Singapore and Thailand from 1980:Q1 to 2017:Q1. Autoregressive distributed lag (ARDL) approach is employed to determine the long-run relationship. Further, a range of econometric models, such as fully modified least squares method (FMOLS), canonical cointegration regression (CCR) and dynamic ordinary least squares method (DOLS), are applied to check the robustness. The results are stable and robust as all the models yield consistency result. The main findings in this study demonstrate that: (a) interest rate had a negative impact on economic growth in three selected countries. (b) Government spending had a negative impact on economic growth in Malaysia and Singapore, but had a positive impact in Thailand. (c) Monetary policy is more effective in Malaysia and Singapore, while fiscal policy is more effective in Thailand. JEL Classification: E52, E58, E62, C01

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Section: Literature Reviewsupporting

confidence: 92%

The Impacts of Monetary and Fiscal Policies on Economic Growth in Malaysia, Singapore and Thailand

Tan

Azali

Habibullah

et al. 2020

South Asian Journal of Macroeconomics and Public Finance

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show abstract

“…This may be due to uncompetitive market forces and higher switching costs in the deposit market than in the lending market (Horváth et al 2004). These pass-through magnitudes for LR and DR are quite similar to those obtained by Perera (2016), who calculated pass-through rates of approximately 98 percent and 63 ppercentrespectively for the 2001-2012 subsample period in the Sri Lankan context.…”

Section: Econometric Approachsupporting

confidence: 86%

“…As a developing economy, Sri Lanka experiences higher volatility in the interbank market, mainly due to commercial banks' involvement in foreign exchange operations and fiscal financing through state commercial banks. Hence, the interbank money market rate may not be the best proxy for the policy rate in this case (Perera 2016). Furthermore, Fuertes & Heffernan (2009) argue that the money market rate is not a good proxy for the policy rate because it is driven largely by the demand and supply of the interbank fund.…”

Section: Datamentioning

confidence: 99%

The Role of Financial Structural Factors in Retail Rate Adjustment: Evidence from Sri Lanka

Fernando¹

2022

jeb

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This paper examines the interest rate channel of monetary policy transmission. It assesses the impact of banking structural factors on commercial bank pricing decisions and their pass-through in Sri Lanka. The empirical analysis uses aggregate monthly interest rates data from January 2008 to December 2018, a total of 132 observations. The findings suggest that the interest rate pass-through is significant overall, but incomplete. The credit quality, operational efficiency and excess liquidity play essential roles in explaining the adjustments of the bank lending and deposit rates. Non-performing loans increase the lending rate, and this result is robust to different combinations of the control variables. This suggests that banks with higher proportions of non-performing loans attempt to pass their credit losses on to customers. Further, bank inefficiency is passed on to customers in the form of lower deposit rates and excess liquidity in the banking system, both of which have a negative effect on the interest rate adjustments of both lending and deposit rates. A puzzling negative relationship is observed between the lending rate and operational inefficiency. The findings of this paper support the claim that banks in Sri Lanka take into consideration their structural factors as well as the monetary policy rates when setting the lending and deposit rates.

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“…This price puzzle refers to a positive interest rate shock leading to an initial increase in the price level, rather than a reduction (Sims, 1992;Christiano, Eichenbaum & Evans, 1994;Balke & Emery, 1994). Furthermore, the research studies by Arin and Jolly (2005) covering Australia and New Zealand and Perera (2016) for Sri Lanka also showed a positive relationship between the interest rate and inflation. Several studies have included other variables, such as commodity prices (Hanson, 2004) or the output gap (Bonga-Bonga & Kabundi, 2011) in order to overcome the problem of the price puzzle.…”

Section: Empirical Evidence On the Relationship Between The Monetary Policy Fiscal Policy And Inflationmentioning

confidence: 87%

Monetary and Fiscal Policies on Inflation: Evidence From Precrisis and Post-Crisis Periods in Thailand

Tan¹,

Azali²

2019

IJBMER

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The purpose of this study is to examine the long-run relationship monetary and fiscal policy on inflation in Thailand by employing an Autoregressive Distributed Lag (ARDL). This study uses quarterly data from 1980: Q1 to 2017:Q1 and divides the sample data into pre-crisis period (1980Q1-1997Q3) and post crisis period (1997Q4-2017Q1). The results revealed that the longrun relationship between government spending and inflation was positive. The results implied that government spending was one of the important components when determining the inflation. However, interest rate was positive in pre-crisis and negative in post-crisis. The results indicated that monetary policy is more effective on inflation in the post-crisis period. Both pre-crisis and post-crisis period show that fiscal policy is more effective in influencing the inflation in Thailand. These results suggest that inflation in Thailand inflation is highly sensitive to the change in monetary and fiscal policies, especially as it emerges from a financial crisis.

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Monetary Transmission Mechanism in Sri Lanka: A Comprehensive Assessment with New Evidence

Abstract: This study provides

Cited by 7 publications

References 111 publications

The Impacts of Monetary and Fiscal Policies on Economic Growth in Malaysia, Singapore and Thailand

The Impacts of Monetary and Fiscal Policies on Economic Growth in Malaysia, Singapore and Thailand

The Role of Financial Structural Factors in Retail Rate Adjustment: Evidence from Sri Lanka

Monetary and Fiscal Policies on Inflation: Evidence From Precrisis and Post-Crisis Periods in Thailand

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