Monetary Policy Transmission in Emerging Markets: Proverbial Concerns, Novel Evidence
IMF Working Papers, May 3, 2024
Source details
- Canonical URL
- Monetary Policy Transmission in Emerging Markets: Proverbial Concerns, Novel Evidence
Other formats
Bibliographic details
- Authors: Ariadne Checo, Francesco Grigoli, Damiano Sandri
- Published: May 3, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400268564.001
Summary
- Authors: Ariadne Checo, Francesco Grigoli, Damiano Sandri
- Date: May 3, 2024
- Core finding: Monetary transmission in emerging markets operates similarly to advanced economies.
- Key observed effects of monetary tightening:
- Persistent increase in bond yields.
- Contraction in real activity.
- Delayed reduction in inflation.
- Additional finding: Monetary policy impacts leveraged firms more strongly.
Identification and Methodology
- Novel shock construction: New monetary policy shocks are constructed using analysts’ forecasts of policy rate decisions.
- Identification crucial feature: Analysts can update forecasts up to the policy meeting, allowing them to incorporate any relevant data release.
Main Results
- Transmission channels documented:
- Financial market response: persistent increase in bond yields following tightening.
- Real economy response: contraction in real activity following tightening.
- Inflation response: reduction in inflation that occurs with delay after tightening.
- Comparative conclusion: Evidence indicates transmission in emerging markets is similar to that in advanced economies.
Heterogeneity and Firm-Level Effects
- Leveraged firms: Monetary policy has stronger impacts on leveraged firms relative to less-leveraged firms.
Content in this bundle
- Working Paper