Publisher's Synopsis
The book analyzes distorted structures of the monetary and banking systems in developing countries which are common features. They negatively affect their macroeconomic efficiency and eventually lead to economic distorted performance and distortions. Sudan as an example of LDCs the banking sector has been suffering problems over the last three decades, generating the following impacts: Loss of banking sector of its role of financial intermediation, cash scarcity in the banking sector, large government borrowings from unreal source of finance, thus, more inflation. The research attempts to specify the main determinants of cash outflow from the banking sector in Sudan (during the period 1972-2001). Hence, those revealing the major impacts of the cash outflow on the economic activity and rates of inflation. The research hypotheses were: (1) the Banks economic behavior of attainment reserves and expanding loans is main cause of cash outflow, (2) the government financial activity to cover its budget deficits, and the effective demand for money liquidity by the public are the main factors transmitting the impacts of cash outflow to the major macroeconomic variables (Money stock, aggregate demand and supply, cost of resource adjustment, and the rate of inflation), (3) Monetization of bank loans via allowing the growth in the effective demand for liquidity by the public directly leads to aggravation of inflation given the downward trend of money velocity, (4) Monetization of bank loans via financing the current deficits of the government, causes an inflationary pressures due to aggregate demand expansion, the real side of the economy will not be affected.
