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The purpose of this paper is to investigate the optimal inflation targets for an appropriate exchange rate policy in 15 major oil exporting countries in Sub-Saharan African (SSA).

Dynamic heterogeneous panel threshold techniques are used via threshold-effect test and threshold regression. This procedure is achieved through a grid search and bootstrapping replications method to stimulate the asymptotic distribution of the likelihood ratio test of the null hypothesis on no-threshold as against the alternative hypothesis. The p-values validate the threshold estimates.

Findings revealed that the optimal inflation target has a turning point and its impact on the real exchange rate is up to a threshold level of 14.47 per cent. Furthermore, the inflation rate above the threshold level overwhelmingly revealed its effect on real exchange regimes.

It would have been a good idea to investigate optimal inflation targets for all African countries but due to inadequate data the selection criteria was narrowed to oil-exporting countries in Sub-Saharan Africa.

Inflation targeting beyond the threshold level would have serious implications on the monetary policy.

To the best of the knowledge, this is the first study to look at optimal inflation targets for 15 major oil exporting countries in general and SSA countries in particular. The findings provide a critical analysis of an inflation regime for a typical oil-producing country that oil exports being their source of revenue.

The article aims to establish whether the degree of aversion to inflation and the responsiveness to deviations from potential output have changed over time.

This paper assesses time variation in monetary policy rules by applying a time-varying parameter generalised methods of moments (TVP-GMM) framework.

Using monthly data until December 2022 for five inflation targeting countries (the UK, Canada, Australia, New Zealand, Sweden) and five countries with alternative monetary regimes (the US, Japan, Denmark, the Euro Area, Switzerland), we find that monetary policy has become more averse to inflation and more responsive to the output gap in both sets of countries over time. In particular, there has been a clear shift in inflation targeting countries towards a more hawkish stance on inflation since the adoption of this regime and a greater response to both inflation and the output gap in most countries after the global financial crisis, which indicates a stronger reliance on monetary rules to stabilise the economy in recent years. It also appears that inflation targeting countries pay greater attention to the exchange rate pass-through channel when setting interest rates. Finally, monetary surprises do not seem to be an important determinant of the evolution over time of the Taylor rule parameters, which suggests a high degree of monetary policy transparency in the countries under examination.

It provides new evidence on changes over time in monetary policy rules.

This paper appraises the effects of monetary policy on trade in value-added (TiVA) using a panel of 38 developing countries spanning the period 1990 to 2019. Specifically, the authors subsequently summon the theory of trade in intermediate products within the New Keynesian framework for open economies that comprises price rigidity to verify this relationship and thereon control for robustness by correcting for endogeneity and unbalanced panel effect.

The authors mobilize the within estimator corrected for cross sectional dependence as well as the two-stage-least squares fixed effect estimator which corrects for endogeneity. For robustness, the authors also use the Hausman–Taylor estimator to control for endogeneity and random effects in annualized data and the least squares dummy variable corrected estimator.

Results suggest that the monetary policy instruments such as inflationary gaps and anticipatory inflationary outcomes significantly affect TiVA in developing countries only in the short term with no long-term effect. In addition to contributing to the scanty empirical literature, the authors provide relevant insights on monetary policy tools that can be mobilized in fashioning a global value chain penetration and upgrading strategies.

The authors convoke the theory of trade in intermediate products casted into the New Keynesian framework comprising price rigidity to verify the relationship between TiVA and monetary policy (b) verify for robustness by correcting for endogeneity and unbalanced panel effect.

This paper aims to examine the effects of interest-free and interest-based monetary policy on inflation and unemployment rates for two groups of countries where in one group, interest-free monetary policy (IFMP) was pursued, while in the other group, interest-based monetary policy (IBMP) was followed.

This study involves a sample of 23 developed countries divided into two groups. The authors measure economic performance by misery index (MI), and MI is calculated as unemployment rate plus inflation rate. A group of countries, where MI is lower, performs better compared to the other group where MI is relatively higher.

The results reveal that in group of 12 countries where IFMP is adopted, the MI is lower and thus performs better compared to a group of countries where IBMP is pursued.

The findings of this study have profound implications for the policymakers and government leaders who look for a solution to maintain both low inflation and unemployment rates. The findings in this study clearly portray that such ideal situations can only be achieved by pursuing IFMP. No wonder the countries which have been historically pursuing IFMP such as Japan, Switzerland, Sweden, the Netherlands and Denmark have been able to contain both inflation and unemployment rates compared to their counterparts among the English-speaking countries.

This is one of the most recent tests on the differences in economic performance between IFMP and IBMP. These results have significant value for policymakers and central bankers who have been struggling to maintain lower MI for decades.

This paper aims to provide an economic rationale for Islamic finance.

Its methodology is simple. It starts with listing the contributions to economic analysis relevant to the required rationale in the theories of banking, finance, price, money and macroeconomics, to identify the main rationale for Islamic finance. A concise description of the author’s model for an Islamic economic system, within which Islamic finance can be operational, is provided.

The paper finds distinct advantages of Islamic finance, when properly applied within the author’s model. Islamic finance can therefore be a candidate as a reform agenda for conventional finance. It opens the door for significant monetary reform in currently prevalent economic systems.

The first limitation of the paper is that the distinct benefits of Islamic finance are all of macroeconomic types which are external to Islamic banking and finance institutions. They are therefore not expected to motivate such institutions to apply Islamic finance to the letter, without regulators interference to ensure strict application. The second limitation is the necessity to set up enabling institutional and regulatory arrangements for Islamic finance.

The results are unique as they challenge the received doctrine and provide non-religious rationale for Islamic finance.

This paper analyzes the effects of the monetary stance on the media's favorable (or otherwise) attitude to the State Bank of Vietnam's (SBV) monetary policy using monthly data from 2011 to 2021. Monetary stance is a multivariate index based on the growth rates of money supply and domestic credit. A large set of articles published in five Vietnam daily newspapers are utilized to construct a view of the media's favorableness to the monetary policy.

This paper uses hand-collected data from 211 articles published in five newspapers from December 2011 to September 2021 in order to examine the relationship between the monetary stance and the media's favorableness to monetary policy. Following the studies of He and Pauwels (2008) and Xiong (2012), the authors constructed a multivariate stance index to capture most of the important changes in the SBV's monetary policy stance.

The study's main findings are that a change in monetary stance from easing to neutral/tightening, or from neutral to tightening, is greatly appreciated by the media. The study's findings are robust, especially in terms of alternative measures of the media's favorableness and monetary policy variables.

These findings have important policy implications for implementing SBV's monetary policy.

The main contribution of this paper is that the authors are the first to study the nexus of multivariate monetary stance and the media's favorableness to a central bank's non-inflation-targeting mandate. In particular, the study’s findings confirm that the SBV's multivariate monetary stance affects the media's favorableness, whereas the effect of inflation is statistically insignificant.

This study empirically aims to analyze the transmission of monetary policy in consideration of asymmetry based on the Bank of the Lao PDR (BOL)'s monetary policy tools and real and financial variables in the domestic market.

This study adopts two approaches, conventional vector autoregression (VAR) and asymmetric VAR, to investigate the impact of monetary policy on macroeconomic variables including inflation and real GDP growth in the Lao PDR.

Under a highly dollarized monetary regime, the policy rate change plays a weaker role compared with M0, which exerts significantly positive effects on real GDP growth and inflation. The results of the asymmetric VAR model further substantiate that the real economy responds to a positive M0 shock (easing monetary policy) rather than a negative shock (tightening monetary policy).

Overall estimation results suggest that the effectiveness of monetary policy is limited in Laos, which would take priority over efforts to strengthen the development of the short-term financial market and de-dollarization.

This study can fill the gap in the literature in which the discussions on the transmission mechanism of monetary policy in the BOL's monetary policy are still little known.

Though an accumulating body of study has analysed monetary policy transmission in India, there are few studies examining the differential impact of monetary policy action. Against this backdrop, this study aims to analyse the differential impact of monetary policy on aggregate demand, aggregate supply and their components along with the general price level in India.

The study develops a structural macroeconometric model, which is primarily aggregate and eclectic in nature. The generalized method of movements is used for estimation of behavioural equations, while a Gauss–Seidel algorithm is used for model simulation purposes.

The paper presents the results of two policy simulations from the estimated model that highlight the differential impact of monetary policy. The first one, hike in the policy rate by 5% and second is a reduction in bank credit to the commercial sector by 10%. The results from the first policy simulation experiment reveal that interest hike has a significant negative impact on aggregate demand, aggregate supply and general price level. However, the maximum impact is borne by investment demand and imports followed by private consumption. While as among the components of aggregate supply maximum impact is born by infrastructure output followed by the manufacturing and services sector with the agriculture sector found to be insensitive in nature. The results from the second policy simulation experiment revealed that pure monetary shocks have a significant negative impact on aggregate demand, aggregate supply and general price level. However, the maximum impact is born by private consumption and imports followed by investment demand. While as among components of aggregate supply maximum impact is borne by infrastructure followed by the manufacturing and services sector with the agriculture sector found to be insensitive in nature. From both policy simulation experiments, the study highlighted the relative importance of the income absorption approach as opposed to the expenditure switching effect.

The results obtained in this study provides a strong framework for design the monetary policy framework. The results are in a view of the differential impact of monetary policy action among the components of both aggregate demand and aggregate supply. This reflection of differential impact has immense significance for the macroeconomic stabilization as the central bank will have to weigh the varying repercussion of its actions on different sectors. For instance, the decline in output after monetary tightening might be conceived as mild from an overall perspective, but it can be appreciable for some sectors. This differential influence will have an implication for policy design to care for distributional aspects, which otherwise could be neglected/disregarded. Similarly, the output decline may be as a result of either consumption postponement or a temporary slowdown in investment. However, the one emanating due to investment decline will have lasting growth implications compared to a decline in consumer demand. In addition, the relative strength of expenditure changing or expenditure switching policies of trade balance stabilization may have varying consequences in the aftermath of monetary policy shock. Accordingly information on the relative sensitiveness/insensitiveness of different sectors/ components of aggregate demand towards monetary policy actions furnish valuable insights to monetary authorities in framing appropriate policy.

The work carried out in the present paper is motivated by the fact that although a number of studies have examined the monetary transmission mechanism in India, a very few studies examining the differential impact of monetary policy action. However, to the best of the knowledge, there is no such studies, which have examined the differential impact of monetary policy in the structural macro-econometric framework. The paper will enrich the existing literature by providing a detailed account of the differential impact of monetary policy among the components of both aggregate demand and aggregate supply in response to an interest rate hike, as well as a decrease in the money supply.

This paper aims to test purchasing power parity (PPP) hypothesis for Greece, Italy, Ireland, Portugal and Spain, which are known as the GIIPS countries.

The authors conduct a comprehensive analysis by using unit root approaches without and with structural breaks and non-linearity.

The PPP is valid for the GIIPS countries. Considering structural breaks in non-linear framework plays a crucial role.

There is no empirical study testing PPP hypothesis by focusing on the GIIPS countries. This study further takes into account for structural breaks and non-linearity in the real exchange rates of these countries.

The purpose of this paper is to evaluate the interest rate (IR) sensitivity of output and prices in developing economies with different levels of financial inclusion (FI) for the period 2007Q1–2017Q4.

By using the PCA method to construct an FI index for each country, the author divides the sample into two groups (high and low FI levels). Then, with panel vector autoregressions on per group estimated to assess the strength of the impulse response of output and prices to IR shock.

The findings show that the impact of an IR shock on output and inflation is greater in economies with a higher degree of FI.

The finding indicates the link between FI and the effectiveness of IRs as a monetary policy tool, thereby helping Central banks to have a clearer goal of FI to implement their monetary policy.

This study emphasizes the important role of FI in the economy. From there, an FI solution is integrated into the construction and calculation of its impact on monetary policy, improving the efficiency of monetary policy transmission, contributing to price stability and sustainable growth.