Making Monetary Policy More Effective: The Case of the Democratic Republic of the Congo

32 Pages Posted: 10 Dec 2013

See all articles by Felix Fischer

Felix Fischer

International Monetary Fund (IMF)

Charlotte Lundgren

International Monetary Fund (IMF)

Samir Jahjah

International Monetary Fund - INS

Date Written: November 2013

Abstract

The paper looks at the challenges of conducting monetary policy in a context of high dollarization of the banking system and weak institutions in the Democratic Republic of the Congo. The empirical analysis confirms the limited effectiveness of the Central Bank of Congo in controlling inflation, despite a rapid policy response to inflation shocks. Options available to enhance the effectiveness of monetary policy are limited. After exploring the pros and cons of different exchange regimes we conclude that strengthening the current monetary policy framework remains the first-best option, given the country’s exposure to frequent terms-of-trade shocks.

Keywords: Monetary policy, Republic of Congo, Central bank autonomy, Dollarization, Exchange rate regimes, inflation, dedollarization, financial deepening., monetary fund, reserve requirements, money demand, liquidity management, monetary base, monetary policy framework, monetary aggregates, money supply, money market, monetary authorities, monetary authority, monetary independence, monetary financing, monetary transmission mechanism, local currencies, treasury bonds, monetary policy regime, monetary policy independence, monetary shocks, monetary regimes, monetary instrument, autonomous monetary policy, monetary targets, monetary policy transmission mechanism, treasury operations, monetary policy inst

JEL Classification: E51, E52, E58, O11, O16

Suggested Citation

Fischer, Felix and Lundgren, Charlotte and Jahjah, Samir, Making Monetary Policy More Effective: The Case of the Democratic Republic of the Congo (November 2013). IMF Working Paper No. 13/226, Available at SSRN: https://ssrn.com/abstract=2365864

Felix Fischer

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Charlotte Lundgren

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Samir Jahjah

International Monetary Fund - INS ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-3682 (Phone)
202-589-6823 (Fax)

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