Making Monetary Policy More Effective: The Case of the Democratic Republic of the Congo
32 Pages Posted: 10 Dec 2013
Date Written: November 2013
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: Suggested Citation