Monetary Transmission : Are Emerging Market and Low Income Countries Different?

Author/Editor:

Ales Bulir ; Jan Vlcek

Publication Date:

November 20, 2015

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

We use two alternative representations of the yield curve to test the functioning of the interest rate transmission mechanism along the yield curve based on government paper in a sample of emerging market and low-income countries. We find a robust link from shortterm policy and interbank rates to longer-term bond yields. Two policy implications emerge. First, the presence of well-developed secondary financial markets does not seem to affect transmission of short term rates along the yield curve. Second, the strength of the transmission mechanism seems to be affected by the choice of the monetary regime: countries with a credible inflation targeting regime seem to have “better behaved” yield curves than those with other monetary regimes.

Series:

Working Paper No. 15/239

English

Publication Date:

November 20, 2015

ISBN/ISSN:

9781513554235/1018-5941

Stock No:

WPIEA2015239

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

37

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