89
Views
1
CrossRef citations to date
0
Altmetric
Original Articles

The appropriate intermediate target for monetary policy in less developed countries: Empirical evidence

Pages 121-137 | Published online: 27 Feb 2008

References

  • Addison , T and Demery , L . 1987 . Monetary control in developing countries. Unpublished report , London : Overseas Development Institute .
  • Adekunle , J O . 1968 . The demand for money: Evidence from developed and less developed countries . IMF Staff Papers , 15 : 220 – 266 .
  • Aghelvi , B B and Khan , M S . 1978 . Government deficits and the inflationary process in developing countries . IMF Staff Papers , 25 : 383 – 416 .
  • Aghelvi , B B , Narvekar , P R and Short , B K . 1979 . Monetary policy in selécted Asian countries . IMF Staff Papers , 26 : 775 – 824 .
  • Andersen , L and Jordan , J . 1968 . Monetary and fiscal actions: A test of their relative importance in economic stabilization . Federal Reserve Bank of St Louis Review , 50 : 11 – 24 .
  • Argy , V . 1983 . Choice of intermediate money target in a deregulated and integrated economy with flexible exchange rates . IMF Staff Papers , 30 : 727 – 751 .
  • Argy , V , Brennan , A and Stevens , G . Monetary targeting: the international experience . Studies in money in credit: Proceedings of a conference . October . pp. 10 – 52 . Reserve Bank of Australia .
  • Barr , G D I and Kantor , B . 1990 . Money and economic activity: A response to the Reserve Bank: A reply . South African Journal of Economics , 58 : 368 – 370 .
  • Barro , R J . 1986 . Recent developments in the theory of rules versus discretion . Economic Journal , 96 : 243 – 271 .
  • Barro , R J and Gordon , D B . 1983 . A positive theory of monetary policy in a natural rate model . Journal of Political Economy , 91 : 589 – 610 .
  • Batten , D S and Thornton , D L . 1983 . M1 or M2: Which is the better monetary target? . Federal Reserve Bank of St Louis Review , June : 36 – 42 .
  • Bernanke , B S and Blinder , A S . Credit, money and aggregate demand . American Economic Review: Papers and proceedings , 78 435 – 439 .
  • Blinder , A S and Stiglitz , J E . 1983 . Money, credit constraints and economic activity . American Economic Review , 73 : 297 – 302 .
  • Bryant , R C . 1982 . Federal reserve control of the money stock . Journal of Money, Credit and Banking , 14 : 597 – 625 .
  • Cagan , P . 1982 . The choice among monetary aggregates as targets and guides for monetary policy . Journal of Money, Credit and Banking , 14 : 661 – 686 .
  • Carr , J L and Darby , M R . 1981 . The role of money supply shocks in the short run demand for money . Journal of Monetary Economics , 7 : 183 – 199 .
  • Chowdurry , A R , Fackler , J S and McMillin , W D . 1986 . Monetary policy, fiscal policy and investment spending: an empirical analysis . Southern Economic Journal , 52 : 794 – 806 .
  • Cooley , T F and Leroy , S F . 1985 . Atheoretical macroeconomics: A critique . Journal of Monetary Economics , 16 : 283 – 308 .
  • Corden , M W . 1987 . The relevance for developing countries of recent developments in macroeconomic theory . World Bank Research Observer , 2 (2) : 171 – 188 .
  • Courakis , A S . 1984 . The Demand for money in South Africa: towards a more accurate perspective . South African Journal of Economics , 52 : 1 – 41 .
  • Crockett , A D and Evans , O J . 1980 . Demand for money in Middle Eastern countries . IMF Staff Papers , 27 : 543 – 577 .
  • Darrat , A F . 1986 . Monetization and stability of money demand in developing countries: The Latin American case . Savings and Development , 10 : 59 – 71 .
  • Davidson , J E H , Hendry , D F , Srba , F and Yeo , S . 1978 . Econometric modelling of the aggregate time‐series relationship between consumers’ expenditure and income in the United Kingdom . Economic Journal , 88 : 661 – 692 .
  • Dickey , D A and Fuller , W A . 1981 . Likelihood ratio statistics for autoregressive time series with a unit root . Econometrica , 49 : 1057 – 1072 .
  • Domowitz , I and Elbadawi , I . 1987 . An error correction approach to money demand: The case of Sudan . Journal of Development Economics , 26 : 257 – 275 .
  • Driscoll , M J and Lahiri , A K . 1983 . Income velocity of money in agricultural developing economies . Review of Economics and Statistics , 65 : 393 – 401 .
  • Eichenbaum , M and Singleton , K S . 1986 . Do equilibrium real business cycle theories explain postwar US business cycles? . NBER Macroeconomics Annual , : 91 – 134 .
  • Engle , R F and Granger , C W J . 1987 . Cointegration and error correction: Representation, estimation and testing . Econometrica , 55 : 251 – 276 .
  • Engle , R F and Yoo , B S . 1987 . Forecasting and testing in cointegrated systems . Journal of Econometrics , 35 : 143 – 159 .
  • Fama , E . 1980 . Banking in the theory of finance . Journal of Monetary Economics , 6 : 39 – 57 .
  • Feige , E . 1967 . Expectations and adjustments in the monetary sector . American Economic Review , 57 : 462 – 473 .
  • Friedman , B M . 1975 . Targets, instruments, and indicators of monetary policy . Journal of Monetary Economics , 1 : 443 – 473 .
  • Friedman , B M . 1977 . The inefficiency of short‐run monetary targets for monetary policy . Brookings Papers on Economic Activity , 2 : 293 – 335 .
  • Friedman , B M . 1982 . Time to re‐examine the monetary targets framework . New England Economic Review , March : 15 – 23 .
  • Friedman , B M . 1983a . Monetary policy with a credit aggregate target . Carnegie‐Rochester Conference Series on Public Policy , 18 : 117 – 148 .
  • Friedman , B M . 1983b . “ The roles of money and credit in macroeconomic analysis ” . In Macroeconomics, prices and quantities: Essays in memory of Athur M Okun , Edited by: Tobin , J . Oxford : Basil Blackwell .
  • Friedman , B M . 1988 . Monetary policy without quantity variables . American Economic Review: Papers and Proceedings , 7 : 440 – 445 .
  • Friedman , B M . 1990 . “ Targets and instruments of monetary policy ” . In Handbook of monetary economics , Edited by: Friedman , B M and Hahn , F H . vol 2 , 1185 – 1230 . Amsterdam : Elsevier Science Publishers .
  • Friedman , M . 1956 . “ The quantity theory of money — a restatement ” . In Studies in the quantity theory of money , Edited by: Friedman , M . 3 – 24 . Chicago : University of Chicago Press .
  • Fry , M . 1982 . Models of financially repressed developing countries . World Development , 10 : 553 – 567 .
  • Fry , M . 1988 . Money, interest and banking in economic development , Baltimore : Johns Hopkins University Press .
  • Fuller , W A . 1976 . Introduction to statistical time series , New York : Wiley .
  • Galbis , V . 1979 . Inflation and interest rate policies in Latin America: 1967‐1976 . IMF Staff Papers , 26 : 334 – 366 .
  • Goodhart , C A E . 1990 . Money, information and uncertainty. , 2nd ed. , London : Macmillan .
  • Granger , C W J . 1969 . Investigating causal relations by econometric models and cross spectral methods . Econometrica , 37 : 424 – 438 .
  • Granger , C W J . 1986 . Developments in the study of cointegrated economic variables . Oxford Bulletin of Economics and Statistics , 48 : 213 – 228 .
  • Griffiths , B and Wood , G E , eds. 1981 . Monetary targets: Their nature and record in the major economies , London : Macmillan .
  • Guitan , M . 1973 . Credit vs money as instrument of control . IMF Staff Papers , 20 : 785 – 800 .
  • Hafer , R W . 1985 . Choosing between M1 and debt as an intermediate target for monetary policy . Carnegie‐Rochester Conference Series on Public Policy , 22 : 89 – 132 .
  • Hall , R E . 1982 . Monetary trends in the United States and United Kingdom: A review from the perspective of new developments in monetary economics . Journal of Economic Literature , 20 : 1552 – 1556 .
  • Hendry , D F . 1979 . “ Predictive failure and econometric modelling in macroeconomics: the transactions demand for money ” . In Economic modelling , Edited by: Omerod , P . London : Heinemann .
  • Hetzel , R L . 1984 . A monetarist money demand function . Federal Reserve Bank of Richmond Economic Review , Nov : 15 – 19 .
  • Hsaio , C . 1981 . Autoregressive modelling and money‐income causality detection . Journal of Monetary Economics , 7 : 85 – 106 .
  • Hurn , A S . 1991 . Causality, predictability and monetary targets in South Africa . South African Journal of Economics, , 59 (4) : 405 – 424 .
  • Jonson , P and Rankin , R W . 1986 . On some recent developments in monetary economics . Economic Record , 62 : 257 – 267 .
  • Karenken , J H , Muench , T J and Wallace , N . 1973 . Optimal open market strategy: The use of information variables . American Economic Review , 63 : 156 – 172 .
  • Keller , P M . 1980 . Implications of credit policies for output and the balance of payments . IMF Staff Papers , 27 : 451 – 478 .
  • Kennan , J . 1979 . The estimation of partial adjustment models with rational expectations . Ecoaometrica , 47 : 1441 – 1455 .
  • Khan , M S and Knight , M D . 1981 . Stabilization programs in developing countries: a formal framework . IMF Staff Papers , 28 : 1 – 53 .
  • Killick , T and Mwega , F M . 1990 . Monetary policy in Kenya: 1967‐1988 , Working Paper, 39 Overseas Development Institute .
  • Killick , T . 1991 . Financial management and economic development: Some issues . South African Journal of Economics , 59 (3) : 287 – 312 .
  • Kopcke , R W . 1984 . Inflation and the choice of monetary guidelines . New England Economic Review , Jan : 5 – 14 .
  • Kydland , F E and Prescott , E C . 1977 . Rules rather than discretion: the inconsistency of optimal plans . Journal of Political Economy , 85 : 473 – 491 .
  • Laidler , D E W . 1977 . The demand for money: Theories and evidence. , 2nd ed. , New York : Don‐Donnelly .
  • Laidler , D E W and Parkin , J M . 1970 . The demand for money in the United Kingdom, 1955‐1967: Preliminary estimates . Manchester School , 28 : 187 – 208 .
  • Laumas , P A and Porter‐Hudak , S . 1986 . Monetization, economic development and the exogeneity of money . Journal of Development Economics , 21 : 25 – 34 .
  • Lown , C S . 1988 . The credit‐output link vs the money‐output link: New evidence . Federal Reserve Bank of Dallas Economic Review , March : 1 – 9 .
  • Maccallum , B T and Hoehn , J G . 1983 . Instrument choice for money stock control with contemporaneous and lagged reserve requirements . Journal of Money, Credit and Banking , 15 : 96 – 101 .
  • McKinnon , R I . 1973 . Money and capital in economic development , Washington : Brook‐ings Institution .
  • McMillin , W D and Fackler , J S . 1984 . Monetary vs credit aggregates: an evaluation of monetary policy targets . Southern Economic Journal , 50 : 711 – 723 .
  • Mathieson , M . 1979 . Financial reform and capital flows in a developing economy . IMF Staff Papers , 26 : 450 – 489 .
  • Maxwell , T . 1971 . The long‐run demand for money in South Africa, 1918‐1960: Some preliminary findings . South African Journal of Economics , 39 : 13 – 30 .
  • Mehra , Y P . 1978 . Is money exogenous in money‐demand equations? . Journal of Political Economy , 86 : 211 – 228 .
  • Morris , F E . 1982 . Do the monetary aggregates have a future as targets of federal reserve policy? . New England Economic Review , March : 5 – 14 .
  • Nelson , C R and Plosser , C I . 1982 . Trends and random walks in macroeconomic time series: some evidence and implications . Journal of Monetary Economics , 10 : 139 – 162 .
  • Nickell , S . 1985 . Error correction, partial adjustment and all that: an expository note . Oxford Bulletin of Economics and Statistics , 42 : 119 – 129 .
  • Odedokun , M O . 1988 . The impacts of financial variables and the composition of financial aggregates on the Nigerian economy . Savings and Development , 12 : 127 – 143 .
  • Park , Y C . 1973 . The role of money in stabilization policy in developing countries . IMF Staff Papers , 20 : 379 – 418 .
  • Phillips , A W . 1954 . Stabilization policy in a closed economy . Economic Journal , 64 : 290 – 323 .
  • Pierce , D A . 1977 . Relationships — and the lack thereof— between economic time series, with special reference to money, reserves and interest rates . Journal of the American Statistical Association , 72 : 11 – 22 .
  • Please , S . 1991 . Financial resources for development . South African Journal of Economics , 59 (3) : 331 – 351 .
  • Poole , W . 1970 . Optimal choice of monetary policy instrument in a simple stochastic macro model . Quarterly Journal of Economics , 84 : 197 – 216 .
  • Porter , R D and Offenbacher , E K . 1983 . Empirical comparison of credit and monetary aggregates using vector autoregressive methods . Federal Reserve Bank of Richmond Economic Review , Nov : 16 – 29 .
  • Porzecanski , A C . 1979 . Patterns of monetary policy in Latin America . Journal of Money, Credit and Banking , 11 : 427 – 437 .
  • Roe , A . 1989 . Methods for deficit financing in less developed countries , Development Economics Research Centre, University of Warwick . Unpublished paper,
  • Rogoff , K . 1985 . The optimal degree of commitment to an intermediate target . Quarterly Journal of Economics , 100 : 1169 – 1189 .
  • Sargan , J D . 1964 . “ Wages and prices in the United Kingdom: a study in econometric methodology ” . In Econometrics and quantitative economics , Edited by: Hendry , D F and Wallis , K F . Oxford : Basil Blackwell .
  • Sargent , T J . 1987 . Macroeconomic theory. , 2nd ed. , Boston : Academic Press .
  • Sargent , T J and Wallace , N . 1975 . Rational expectations, the optimal monetary instrument and the optimal money supply rule . Journal of Political Economy , 83 : 241 – 254 .
  • Shaw , E S . 1973 . Financial deepening in economic development , New York : Oxford University Press .
  • Sims , C A . 1980 . Comparison of interwar and postwar business cycles: Monetarism revisited . American Economic Review , 70 : 250 – 257 .
  • Sims , C A . 1982 . Policy analysis with econometric models . Brookings Papers on Economic Activity , 12 : 107 – 164 .
  • Sowa , N K . 1991 . Monetary control in Ghana: 1957‐1988 . Overseas Development Institute Working Paper , : 45
  • Swamy , P A V B and Tavlas , G S . 1989 . Financial deregulation, the demand for money, and monetary policy in Australia . Economic Record , 47 : 63 – 101 .
  • Tavlas , G S . 1989 . The demand for money in South Africa: A test of the buffer stock model . South African Journal of Economics , 57 : 1 – 13 .
  • Tjostheim , D . 1981 . Granger‐causality in multiple time series . Journal of Econometrics , 17 : 157 – 176 .
  • Tobin , J . 1970 . Money and income: Post hoc ergo propter hoc . Quarterly Journal of Economics , 84 : 301 – 317 .
  • Tobin , J . 1983 . Monetary policy: Rules, targets and shocks . Journal of Money, Credit and Banking , 15 : 506 – 518 .
  • Ubogo , R E . 1985 . Potency of monetary and fiscal policy instruments on economic activities of African countries . Savings and Development , 9 : 441 – 457 .
  • Van Den Heever , J . 1990 . Modellering van die geldvoorraad in Suid‐Afrika , South African Reserve Bank . Unpublished paper,
  • Van Wijnbergen , S . 1982 . Stagflationary effects of monetary stabilization policies: A quantitative analysis of South Korea . Journal of Development Economics , 10 : 133 – 169 .
  • Wong , C . 1977 . Demand for money in developing countries: Some theoretical and empirical results . Journal of Monetary Economics , 3 : 59 – 86 .
  • The author is indebted to Lionel Demery from the World Bank and the University of Warwick, Andrew McKay from the University of Warwick and to two anonymous referees for helpful comments and insights made on an earlier draft of this paper.
  • Department of Economics, Potchefstroom University, Potchefstroom.

Reprints and Corporate Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

To request a reprint or corporate permissions for this article, please click on the relevant link below:

Academic Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

Obtain permissions instantly via Rightslink by clicking on the button below:

If you are unable to obtain permissions via Rightslink, please complete and submit this Permissions form. For more information, please visit our Permissions help page.