THE IMPACT OF MONETARY SURPRISE AND SYSTEMATIC MONETARY-POLICY IN DEVELOPING-COUNTRIES - EMPIRICAL RESULTS FROM AN INTERNATIONAL PERSPECTIVE

The study examines whether (in developing economies), in accordance with the macro rational expectations hypothesis, it is only the unanticipated monetary growth, and not anticipated monetary growth, that has a significant positive impact on the real GDP. We conduct a cross-country annual-data-based study that embraces 16 developing countries over periods that fall within 1957-1989. We employ the anticipated and unanticipated monetary growth as regressors in explaining variations in the cyclical part of real GDP and find that the unanticipated monetary growth does not necessarily explain variations in the real GDP better than the anticipated monetary growth, particularly in the low-income developing countries. Our findings show that while the hypothesis is somewhat supported in the high-income LDCs, it is generally contradicted in the low-income LDCs. A conclusion emanating from the findings is that the extent of the level of economic development of a country positively affects the degree of relevance of the hypothesis there.