Abstract: The purpose of this paper is to analyze the recent trends in the monetary policy of the Central Bank of Sri Lanka (CBSL). In Sri Lanka, the CBSL has introduced a series of operational changes in the recent past with a view to improving the framework for monetary policy implementation. Whilst maintaining inflation at single digits remained the focus of monetary policy, the framework for the conduct of monetary policy was based on monetary targeting with reserve money as the operating target and broad money as the intermediate target. This policy has been successful to a great extent in controlling demand driven inflationary pressures in the economy. The CBSL has made several improvements with respect to inflation forecasting, estimation of core inflation, and strengthening financial system stability, which would facilitate the move toan inflation targeting policy framework. The CBSL is also of the view that the country needs to move to a better monetary policy regime enabling it to main

• Publication Date: 17-Nov-2014
• DOI: 10.15224/978-1-63248-052-1-77
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Abstract: This study attempts to shed light into the empirical relationship between energy consumption and economic growth in Sri Lanka (1981-2012) employing the vector error-correction model estimation (VECM). The vector specification includes energy consumption, real GDP and price developments, and the latter was taken to represent a measure of economic efficiency. The empirical evidence suggests that there is a long-run relationship among the three variables, supporting the endogeneity of energy consumption and real output. These findings suggest important policy implications, since the adoption of suitable structural policies aiming at improving economic efficiency can induce energy consumption without impeding economic growth.

• Publication Date: 17-Nov-2014
• DOI: 10.15224/978-1-63248-052-1-78
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