Central banking in developing countries after the crisis: what has changed?

Abstract

The aim of this paper is to assess how the theory and practices of central banking have evolved in developing countries in response to the crisis of 2008-2009. Our findings suggest that the recent experiences of both advanced countries and developing countries during and after the global economic crisis have exposed the problems within mainstream monetary theory. In response to the crisis, mainstream thinking has been revised considerably. In line with this, there is also a shift in central banking practices in developing world. As a result, central banks now have multiple goals and multiple tools in developing countries as well. Yet, this shift is insufficient to trigger a major change in understanding and implementing monetary policy. Especially, in the absence of a rethinking of the international financial architecture and comprehending the specific natures of the transmission mechanisms in developing world, developing countries are not satisfactorily capable of implementing effective monetary policy and are still heavily exposed to external shocks. JEL Classification E 52; E 58; O 57; G 15; G 01