Informality, rule-of-thumb consumers, and the effectiveness of monetary policy in emerging economies

IF 4.6 Q2 MATERIALS SCIENCE, BIOMATERIALS
Mtendere Chilolo Chikonda , Georgios Chortareas
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Abstract

This paper investigates how the presence of a large fraction of rule-of-thumb consumers and an informal sector and (henceforth, informality) impact on the effectiveness of monetary policy in developing/emerging economies. We develop a small open economy New-Keynesian model, which is estimated using data on selected Sub-Saharan African countries where the coexistence of these two frictions is widespread - Burundi, Malawi and Rwanda. The results reveal that (i) rule-of-thumb consumption enhances the dominance of demand shocks and makes inflation stabilization a challenge; (ii) the presence of an informal sector causes supply shocks to be dominant, creating a trade-off between stabilizing inflation and output; (iii) rule-of-thumb consumption weakens the transmission mechanism of monetary policy while its interaction with informality worsens the situation in most of the selected countries; (iv) informality amid a large population of rule-of-thumb consumers causes the nominal interest rate to counterintuitively decline in response to a contractionary monetary policy shock; (v) in some of the selected countries, a positive productivity shock counterintuitively triggers a nominal exchange rate appreciation when informality interacts with rule-of-thumb consumption behavior; (vi) the coexistence of informality and rule-of-thumb consumption behavior amplifies country-risk premium shocks and; (vii) rule-of-thumb consumption behavior is welfare enhancing. These findings are informative to policymakers, particularly in emerging economies, on the priority reforms as they transition to inflation targeting frameworks. Direct policy implications emerge regarding financial inclusion, the size of the informal sector, and farm input subsidy programs.

新兴经济体的非正规性、拇指规则消费者和货币政策的有效性
本文研究了在发展中经济体/新兴经济体中,大量 "守规矩 "的消费者和非正规部门(以下简称 "非正规性")的存在如何影响货币政策的有效性。我们建立了一个小型开放经济新凯恩斯主义模型,并利用部分撒哈拉以南非洲国家(布隆迪、马拉维和卢旺达)的数据对该模型进行了估算,这些国家普遍存在这两种摩擦。结果表明:(i) 盲目消费加强了需求冲击的主导地位,使稳定通货膨胀成为一项挑战;(ii) 非正规经济部门的存在导致供应冲击占主导地位,从而在稳定通货膨胀和产出之间造成权衡;(iii) 盲目消费削弱了货币政策的传导机制,而其与非正规经济部门的相互作用则使大多数选定国家的情况更加恶化;(iv)大量拇指规则消费者中的非正规性导致名义利率在紧缩性货币政策冲击下出现反直觉下降;(v)在一些选定国家,当非正规性与拇指规则消费行为相互作用时,正生产率冲击会反直觉地引发名义汇率升值;(vi)非正规性与拇指规则消费行为并存会放大国家风险溢价冲击;(vii)拇指规则消费行为会提高福利。这些发现对政策制定者,尤其是新兴经济体的政策制定者在过渡到通胀目标框架时的优先改革具有启发意义。在金融包容性、非正规部门规模和农业投入补贴计划方面,也会产生直接的政策影响。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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来源期刊
ACS Applied Bio Materials
ACS Applied Bio Materials Chemistry-Chemistry (all)
CiteScore
9.40
自引率
2.10%
发文量
464
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