Interest Rate as a Policy Instrument – Recent Experience of Sri Lanka

Abstract

Interest rate is used as a monetary policy instrument in most countries. Sri Lanka too, uses interest rates as one of the policy instruments to achieve the objectives of the Central Bank. In this paper, the relationships between policy rates and other macroeconomic variables are identified and empirical estimations are carried out to find out to what extent the interest rates could be used to manage macroeconomic variables, based on which some policy implications are suggested.

DOI: http://dx.doi.org/10.4038/ss.v39i1.3152

Staff Studies Vol.39(1&2) 2009 pp.15-36