Macro-Prudential Policies – Five Decades of Trying to Keep the Financial Sector Stable
November 2024 2024-12-11 15:55Authors
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Macro-Prudential Policies – Five Decades of Trying to Keep the Financial Sector Stable
Abstract
| Healthy financial intermediation should be able to support monetary policy and transmit economic shocks (Bernanke, 2007; and Stein, 1998). Little research was devoted to less developed economies despite their relatively higher contingency to volatility, political instability, and difficulty in obtaining reliable data (Fernandez, 2003). The objective of this chapter is to provide answers to three main questions regarding the conduct of monetary policy in Egypt: (i) Does the bank’s credit operate as a transmission channel for monetary policy and, if not, what is the alternative channel that transmits monetary policy in Egypt? (ii) Is the credit channel important to guide monetary authorities and the financial economics profession? (iii) How can Structural Vector Auto Regression (SVAR) be adopted to model monetary policy strategy for Egypt? My findings confirm the existence of a—statistically significant—credit channel for monetary policy when considering the monetary base as an operating target. The key outcome is that the credit channel, if properly considered, can help authorities propagate monetary policy shocks to the real economy. |
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