Financial Liberalization, Money Demand, and Monetary Policy in Asian Countries

During the 1980s virtually all Asian Countries liberalized their domestic financial systems. In many of these countries, this was accompanied by the relaxation of capital controls and a move toward more flexible exchange rate arrangements. These developments have altered the channels of monetary policy, affected the relationship between money demand and incomes and interest rates, and prompted a reassessment of the appropriate instruments of monetary policy. This paper focuses on these and other issues of monetary policy in the wake of the financial reforms.