TY - BOOK ID - 84873687 TI - Unraveling the Monetary Policy Transmission Mechanism in Sri Lanka PY - 2014 SN - 1498314686 1484302087 PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - Sri Lanka KW - Shri Lanka KW - Lanka KW - Serendib KW - Taprobane KW - Cellao KW - Zeilan KW - Serendip KW - Sī Langkā KW - Sri Lanka Prajathanthrika Samajavadi Janarajaya KW - Democratic Socialist Republic of Sri Lanka KW - Śrīlaṅkā KW - Ilaṅkai KW - Ceylon KW - Monetary policy. KW - Banks and Banking KW - Finance: General KW - Money and Monetary Policy KW - Monetary Policy KW - Central Banks and Their Policies KW - Open Economy Macroeconomics KW - General Equilibrium and Disequilibrium: Financial Markets KW - Interest Rates: Determination, Term Structure, and Effects KW - Monetary Policy, Central Banking, and the Supply of Money and Credit: General KW - General Financial Markets: General (includes Measurement and Data) KW - Banking KW - Finance KW - Monetary economics KW - Central bank policy rate KW - Repo rates KW - Bank credit KW - Deposit rates KW - Money markets KW - Financial services KW - Money KW - Financial markets KW - Interest rates KW - Credit KW - Money market UR - https://www.unicat.be/uniCat?func=search&query=sysid:84873687 AB - In this paper we examine the channels through which innovations to policy variables— policy rates or monetary aggregates—affect such macroeconomic variables as output and inflation in Sri Lanka. The effectiveness of monetary policy instruments is judged through the prism of conventional policy channels (money/interest rate, bank lending, exchange rate and asset price channels) in VAR models. The timing and magnitude of these effects are assessed using impulse response functions, and through the pass-through coefficients from policy to money market and lending rates. Our results show that (i) the interest rate channel (money view) has the strongest Granger effect (helps predict) on output with a 0.6 percent decrease in output after the second quarter and a cumulative 0.5 percent decline within a three-year period in response to innovations in the policy rate; (ii) the contribution from the bank lending channel is statistically significant (adding 0.2 percentage point to the baseline effect of policy rates) in affecting both output and prices but with a lag of about five quarters for output and longer for prices; and (iii) the exchange rate and asset price channels are ineffective and do not have Granger effects on either output or prices. ER -