The monetary transmission mechanism in Sri Lanka 1977-1985. A macro simulation approach to the modelling of the money supply process and the construction of an analytical framework for monetary management.

摘要

The primary objective of this thesis is to analyseudthe relationship between money and the macro-economy in SriudLanka between 1977 and 1985, in order to identify the pathsudthrough which monetary policy impulses are transmitted overudthis period. In doing so, - we also hope to highlight the useudof macro-simulation as a tool for the analysis of theudmonetary transmission mechanism and to emphasise the importanceudof formulating monetary policy within an explicitudmonetary control framework. This is especially important inudSri Lanka since monetary policy has been a key instrumentudof demand management since 1977 and historically there hasudbeen a noticeable absence of an explicit monetary controludframework.udEmpirical research on the monetary transmissionudmechanism has been very limited as far as developing countriesudare concerned. An exception here is the SEACEN (1981)udstudy which simulates the effects of monetary shocks on audnumber of South East Asian countries, including Sri Lanka,udusing a flexible monetarist approach. Our research is basedudupon a revision of the specification of this model for SriudLanka and a more comprehensive disaggregation of the monetaryudtransmission channels.udOur empirical model produces statistical resultsudwhich are generally acceptable and conform to a Prioriudexpectations. This model is then simulated dynamically,udboth, to validate the equations in the context of a completeudmodel and to quantify the impact of alternativeudpolicy scenarios relating to the monetary transmissionudmechanism in Sri Lanka.udWe believe that our results will help to shed lightudon the nature of the monetary transmission mechanism inuddeveloping countries as well as provide the basis for anudon-going analysis of monetary management in Sri Lanka.