Factors Impacting the Effectiveness of Monetary Policies

Within the research, an analysis of factors influencing the effectiveness of monetary policy was conducted. The metric for effectiveness employed was the difference between annual inflation in the economic region and the country. Data were collected for 31 countries from 2007 to 2019, which helped determine the true nature of influence from the following factors: trade turnover per capita, share of vulnerable employment, reserve volume (including gold and foreign exchange reserves), the proportion of resource rent in GDP, the influx of foreign capital, the share of the service sector in GDP, and the share of the shadow sector in the economy. Fixed effects models for both individuals and time were used for the analysis, which showed statistical significance for all factors except for the share of natural rent in GDP. As a result of the study, it was determined that the parameters of a country's macroeconomic condition affect the effectiveness of monetary policy. Therefore, to carry out effective measures, monetary authorities need to engage actively with the rest of the government apparatus.