Abstract
This chapter discusses formulating monetary model for developing countries. Meaningful monetary analyses in less developed countries (LDCs) require a structural model complete with a financial sector in the spirit of the Keynesian income/expenditure theory. However, one must realize that the differences in structural characteristics and institutional elements between advanced and developing countries are so extensive that any straightforward application of the models of advanced countries to LDCs would be grossly unrealistic. If the models that have been successful in advanced countries were to be made useful for LDCs, they should be modified to reflect these differences. In formulating models for developing economies, one must also realize that the structural and institutional differences among LDC are as varied as those among advanced countries. Therefore, it would be impossible to build a model appropriate to all LDCs. The chapter also discusses the ways in which some of characteristic features of LDCs may be incorporated into a model. It presents the financial structure of LDCs.
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