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Mr. Ananthakrishnan Prasad and Mr. Raphael A Espinoza

literature has been a quarter, or even a month. We therefore investigate both VARs based on annual data and VARs based on quarterly data with annual GCC data interpolated into quarterly data. A. Data An eight-variable panel VAR was estimated on non-oil real GDP (the ‘GCC Y’ variable), government expenditure (GCC G), CPI inflation (GCC P), and broad money (GCC M2) in the GCC, from 1980 to 2010. 12 In addition, we used the Fed Funds Rate (FFR) as an indicator of imported monetary policy, and U.S. GDP (US Y), the U.S. Personal Consumption Deflator (US P)as well as the

Mr. Ananthakrishnan Prasad and Mr. Raphael A Espinoza
The GCC countries maintain a policy of open capital accounts and a pegged (or nearly-pegged) exchange rate, thereby reducing their freedom to run an independent monetary policy. This paper shows, however, that the pass-through of policy rates to retail rates is on the low side, reflecting the shallowness of money markets and the manner in which GCC central banks operate. In addition to policy rates, the GCC monetary authorities use reserve requirements, loan-to-deposit ratios, and other macroprudential tools to affect liquidity and credit. Nonetheless, a panel vector auto regression model suggests that U.S. monetary policy has a strong and statistically significant impact on broad money, non-oil activity, and inflation in the GCC region. Unanticipated shocks to broad money also affect prices but do not stimulate growth. Continued efforts to develop the domestic financial markets will increase interest rate pass-through and strengthen monetary policy transmission.
Mr. Ananthakrishnan Prasad and Mr. Raphael A Espinoza
International Monetary Fund. External Relations Dept.
El Boletín del FMI aborda de manera específica el trabajo del FMI y los grandes temas macroeconómicos y financieros internacionales y ofrece análisis sobre la evolución en los distintos países y regiones y en el mundo; información sobre las operaciones, políticas, reformas y asistencia técnica del FMI; síntesis de las principales investigaciones económicas mundiales; datos fundamentales que no suelen estar disponibles en otras fuentes, e informes sobre debates económicos y financieros que tienen lugar dentro y fuera del FMI. Este boletín de 16 páginas, publicado 12 veces al año, está orientado a una vasta audiencia, que incluye autoridades de política económica, analistas, profesionales del mundo académico y de los medios de difusión y estudiantes. Disponible en inglés, español y francés.
Mr. Armand P Fouejieu, Mr. Sergio L. Rodriguez, and Mr. Sohaib Shahid

the relationship between government spending and non-oil growth by exploring the impact of fiscal policy on non-oil output using updated estimates of the fiscal multiplier. Figure 1. Real Government Spending and Non-oil GDP Growth in the GCC (y-o-y percent change, GCC simple average) Using a panel OLS with fixed effects estimated over different time periods, our results indicate that fiscal multipliers have declined in recent years. This implies that fiscal consolidation may be less costly than previously thought. Though both capital and current

International Monetary Fund

multipliers suggests that fiscal consolidation efforts in the GCC could be less costly in terms of growth than before . The decline in the multipliers points to a fall in the efficiency of fiscal spending or crowding out of private sector employment and investment. Alternatively, as GCC fiscal spending increased and surpluses shrank, the private sector may have increased overall savings, reducing the impact of spending on aggregate demand. Government Spending and Non-Oil GDP Growth in the GCC (y-o-y percent change, GCC simple average) D. An Expenditure

Mr. Raphael A Espinoza, Ms. Ghada Fayad, and Mr. Ananthakrishnan Prasad

literature has been a quarter or even a month. We therefore investigate both VARs based on annual data and VARs based on quarterly data with annual GCC data interpolated into quarterly data. 6.5.1 Data An eight-variable panel VAR was estimated on non-oil real GDP (the “GCC Y” variable), government expenditure (GCC G), CPI inflation (GCC P), and broad money (GCC M2) in the GCC, from 1980 to 2010. 11 In addition, we used the Fed Funds Rate (FFR) as an indicator of imported monetary policy, and US GDP (US Y), the US Personal Consumption Deflator (US P), as well as the