Macroeconomic effects of monetary policy shocks evidence from Sri Lanka
By: Abeygunawardana, Kishan
.
Contributor(s): Amarasekara, Chandranath | Tilakaratne, C.D.
Material type: 
BookSubject(s): Monetary transmission | Vector autoregression | Monetary policy shocks
In:
South Asia Economic Journal : Los Angeles ; SAGE, March 2017 : 21-38Summary: This study examines the impact of monetary policy shocks on output, prices and interest rates in Sri Lanka during the period 2003–2012. It finds a strong transmission of policy rate shocks onto the money market rates and the government
securities market yields. However, banking sector interest rates exhibit a smaller and slower impact compared to money and government securities market rates.
The study also finds a weak policy interest rate transmission onto the real sector and prices. The direction of relationships between variables and policy shocks is in conformity with the existing theoretical and empirical priors. The existence of
a large informal economy, volatile excess market liquidity, shallowness of financial markets, relatively less flexible interest rates on deposit and loan products, and fiscal accommodation by monetary policy at times are identified as reasons for weak transmission.
| Item type | Current location | Call number | Vol info | URL | Status | Date due | Barcode | Item holds |
|---|---|---|---|---|---|---|---|---|
| Journal Articles | Library Electronic | South Asia Economic Journal (Browse shelf) | Vol 18 No 01 March 2017 | ftp://ftp.ips.lk/ebooks/Pamphlets/Finance/MacroeconEffeMonetaryPolicy.pdf | Available |
This study examines the impact of monetary policy shocks on output, prices and interest rates in Sri Lanka during the period 2003–2012. It finds a strong transmission of policy rate shocks onto the money market rates and the government
securities market yields. However, banking sector interest rates exhibit a smaller and slower impact compared to money and government securities market rates.
The study also finds a weak policy interest rate transmission onto the real sector and prices. The direction of relationships between variables and policy shocks is in conformity with the existing theoretical and empirical priors. The existence of
a large informal economy, volatile excess market liquidity, shallowness of financial markets, relatively less flexible interest rates on deposit and loan products, and fiscal accommodation by monetary policy at times are identified as reasons for weak transmission.
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