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|Title: ||Monetary frameworks in developing countries : central bank independence and exchange rate arrangements|
|Authors: ||Maziad, Samar|
|Supervisors: ||Cobham, David|
|Keywords: ||Central bank independence|
Fear of floating
Monetary policy independence
|Issue Date: ||Jun-2008|
|Abstract: ||The objective of the thesis was to study monetary policy frameworks in developing
countries. The thesis focused on three aspects of the monetary framework; the
degree of central bank independence, the monetary policy strategy and the exchange rate regime. The research applied quantitative empirical analysis and in-depth
case studies on Egypt, Jordan and Lebanon.
The empirical research investigated three areas: 1) the phenomenon of ‘fear of
floating’ and the correlation between exchange rate and macroeconomic volatility;
2) the degree of monetary policy independence in developing countries in the
context of their increased integration into the global economic system; and 3) the
degree of central bank independence and how it impacts both ‘fear of floating’ and
monetary policy independence. The case studies allowed for an in-depth
understanding of the process of setting monetary policy and the constraints under
which it is formulated in developing countries.
The results that emerged from the quantitative analysis highlight the impact of central bank independence in influencing the other aspects of the monetary framework, as it can mitigate fear of floating and contribute to increased monetary policy independence of world interest rates in developing countries.
The case studies detailed the evolution of monetary frameworks in three countries
with varying degrees of central bank independence. The degree of central bank
independence increased in Egypt and Jordan as a result of severe currency crises in
each country, while Lebanon provides a very different example of a developing
country with an independent central bank since its inception.
The conclusions that emerged from the cases suggest that central bank independence is critical in achieving exchange rate and price stability; however, developing countries should avoid focusing on exchange rate stability at the expense of other considerations for extended periods of time. In that, the results point to the benefits of proactively and pre-emptively managing the exchange rate regime. The cases also highlight the importance of the coordination between fiscal and monetary policies, as conditions of fiscal profligacy can undermine even the
most independent central bank.|
|Publisher: ||University of St Andrews|
|Appears in Collections:||Economics & Finance Theses|
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