Search results

1 – 1 of 1
Per page
102050
Citations:
Loading...
Access Restricted. View access options
Article
Publication date: 29 May 2009

Raulin L. Cadet

The purpose of this paper is to present a model that studies the impact of a tightening monetary policy on banking failure in a developing country.

934

Abstract

Purpose

The purpose of this paper is to present a model that studies the impact of a tightening monetary policy on banking failure in a developing country.

Design/methodology/approach

The interest rate on treasury bills is included in the model to measure monetary policy. Since the model considers developing countries with low‐income level, the paper assumes that a secondary market does not exist.

Findings

The model shows that, despite treasury bills constituting an alternative source of profit for banks in developing countries, a tightening monetary policy increases the probability of banking failure. In addition, the model shows that efficiency level explains the asymmetric effect of monetary policy on the profit of the banks.

Practical implications

The policy implication of the results of the paper is that the central bank should take into account the adverse effect of a tightening monetary policy on banking failure, when planning policy decisions.

Originality/value

The paper offers insights into the linkage between monetary policy and banking failure in developing countries.

Details

Journal of Financial Economic Policy, vol. 1 no. 2
Type: Research Article
ISSN: 1757-6385

Keywords

1 – 1 of 1
Per page
102050