The Interaction Between Conventional Monetary Policy and Financial Stability: Chile, Colombia, Japan, Portugal and the UK

Venter, Zoë

doi:10.1057/s41294-020-00129-w

Cited by 7 publications

(3 citation statements)

References 55 publications

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“…The Chilean economy is characterized by moderate levels of unemployment, price stability, better macro-fiscal performance with low levels of primary fiscal deficits and the lowest general government debt in SA (25.6% of GDP in 2018). At the institutional level, the Chilean Central Bank demonstrates one of the highest levels of Central Bank independence globally and maintains a successful inflation-targeting framework (Venter 2020). Moreover, among the LA countries that have adopted floating regimes and inflation targets, Chile has one of the lowest rates of intervention in the exchange market (Pérez Caldentey and Vernengo 2020).…”

Section: Discussion and Final Considerationsmentioning

confidence: 99%

Can South America form an optimal monetary area? A structural vector autoregression analysis

Padilla

García-Brazales

2020

Int Econ Econ Policy

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This research analyzes the feasibility of adopting a common currency in South America using the Optimal Monetary Areas theory. Taking into account that the relative dominance of regional shocks in local output is considered a key indicator to adopt a regional currency, we use a structural vector autoregression (SVAR) model to determine what type of shock —among global, regional or country specific— prevails in South American economies. The results of variance decomposition demonstrate that the output trajectory of South American countries is mainly explained by country-specific shocks; therefore, South America as a whole is not considered not an optimal monetary area. However, we identified a group of countries —named Sud-5 (comprised of Chile, Peru, Ecuador, Brazil and Argentina)— for which the costs of a hypothetical monetary union would be relatively lower.

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Section: Discussion and Final Considerationsmentioning

confidence: 99%

Can South America form an optimal monetary area? A structural vector autoregression analysis

Padilla

García-Brazales

2020

Int Econ Econ Policy

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“…Since the UK is a service-oriented economy, the increase in bank rate may well instigate the liability of the financial institutions and private banks, which may motivate them toward more profitoriented and less time-consuming actions that will amplify economic activities and promote growth around the country. Advanced economies like the UK had limited choice to reduce bank rates further and, hence, employed unconventional monetary policy tools such as quantitative easing to ensure sustainable economic growth (Venter, 2020).…”

Section: Ajebmentioning

confidence: 99%

Does the monetary policy have any short-run and long-run effect on economic growth? A developing and a developed country perspective

Islam

Hossain

Chakrobortty

et al. 2021

AJEB

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PurposeThe study aims to empirically examine the relationship between monetary policy and economic growth, as well as to explore the long-run and the short-run effect of monetary policy on the economic growth of a developing country (Bangladesh) and a developed country (the United Kingdom).Design/methodology/approachDepending on data availability, the study employed secondary data covering the period of 1980–2019. The augmented Dickey–Fuller test and the Phillips–Perron test were used for the stationarity test. Further, the F-bounds test was run to justify the long-run relationship between monetary policy and economic growth. Thereafter, long-run coefficients were revealed from the auto-regressive distributed lag (ARDL) model and short-run coefficients from the error correction model. Furthermore, the vector error correction model (VECM) Granger causality approach was employed to demonstrate the causality of studied variables. Lastly, different diagnostics tests ensured the robustness of the models.FindingsF-bounds test outcomes suggest that monetary policy has a long-run relationship with economic growth in both countries. Long-run coefficients revealed that money supply has a positive long-run impact on economic growth in both countries. Unlike the UK, the exchange rate exhibits an adverse effect on the economic growth of Bangladesh. The bank rate seems to promote economic growth for the UK. Findings also depict that increase in lending interest rates hurts the economic growth for both countries. Besides, the short-run coefficients portray random effects at different lags in both cases. Lastly, causality among studied variables is revealed using the VECM Granger causality approach.Originality/valueThe novelty of this study lies in consideration of both developing and developed countries in the same study.

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“…(2020) upholds the importance of fiscal policy over monetary policy in the process of economic development. Specifically, Venter (2020) employs the structural vector autoregressive (VAR) model to investigate the effect of monetary policy on economic growth in Chile, Colombia, Japan, Portugal, and the United Kingdom using quarterly data from 2004 to 2018. The results show that monetary policy is not effective in maintaining financial stability and ensuring economic growth in the five countries.…”

Section: Introductionmentioning

confidence: 99%

Reconsidering the nexus between monetary policy and economic growth in Nigeria: The role of interest rate, money supply, and financial inclusion

et al. 2022

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The empirical evidence on the nexus between monetary policy and economic growth remains ambiguous with mixed and differing results, depending on the country's characteristics, the choice of monetary policy variables employed, and recently, the place of financial inclusion in monetary policy formulation and transmission mechanism. This study explores the nexus between monetary policy and economic growth in Nigeria while accounting for the roles of interest rate, money supply, and financial inclusion over a base period of 2004q1 to 2020q4 and a projected period of 30 quarters. Using the dynamic simulation autoregressive distributed lag (ARDL) model, the study finds that in the short run, only the effect of money supply on economic growth is statistically significant. However, in the long run, interest rate, money supply, and financial inclusion have statistically significant effects on economic growth. The results are supported by the plots of the dynamic simulated ARDL, where economic growth response is predicted at various time periods after forcing a ±1% change (positive and negative shocks) in interest rate, money supply, and financial inclusion. We, therefore, recommend among other things an aggressive financial inclusion strategy with clearly defined deliverables and timelines to reduce the percentage of persons excluded from the formal financial system.

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The Interaction Between Conventional Monetary Policy and Financial Stability: Chile, Colombia, Japan, Portugal and the UK

Cited by 7 publications

References 55 publications

Can South America form an optimal monetary area? A structural vector autoregression analysis

Can South America form an optimal monetary area? A structural vector autoregression analysis

Does the monetary policy have any short-run and long-run effect on economic growth? A developing and a developed country perspective

Reconsidering the nexus between monetary policy and economic growth in Nigeria: The role of interest rate, money supply, and financial inclusion

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