The empirical results add to the literature on monetary policy in Laos with five important
findings, which are: i) based on log-levels estimation, we find that money Granger-causes
output, which lends support to the proposition that the BoL is likely to be successful
in stabilizing the business cycle; ii) the investigation of the money demand function
provides strong evidence that the demand function in Laos is stable which implies
that the BoL is likely to be successful in controlling inflation by managing the money
supply; iii) the results of the impulse response analysis find that the responses
of retail interest rates to a change in the policy rate are very small, which suggest
that the likelihood of the BoL using the interest rate channel to achieve the desired
impact on real economy and inflation is limited at this time; iv) the investigation
of inflation determinants suggests that real GDP, money supply and the exchange rate
are important factors in explaining the price level in the long-run and in particular,
the money variable is significant in both the long and the short-run, this supports
the proposition that the BoL is likely to be successful in controlling inflation through
the management of money supply; and lastly, v) the analysis using a monetary model
of the exchange rate does not appear to be very useful in explaining the fundamental
forces that drive the exchange rate between the Lao Kip and U.S. dollar.
Based on some of the findings, it is encouraging to know that through monetary policy,
the central bank, if it chooses to, may be successful in stabilizing the
business cycle and controlling inflation. This would support the government’s objective
of achieving a target output growth of 8 percent and inflation to be under 2 digits.
This further emphasizes the importance of monetary policy in the management of Laos’
Aufgrund einiger der Erkenntnisse ist es ermutigend zu wissen, dass die Zentralbank,
sollte sie sich dafür entscheiden, durch Geldpolitik erfolgreich die Konjunktur stabilisieren
und die Inflation steuern könnte. Dies würde der Regierung dabei helfen, das anvisierte
Produktionswachstum von acht Prozent und einstellige Inflation zu erreichen. Dies
betont nochmalig die Bedeutung von Geldpolitik in der Handhabung der Wirtschaft von
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