## Monetary Policy Transmission in Emerging Markets: Proverbial Concerns, Novel Evidence

_IMF Working Papers, May 3, 2024_

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**Canonical URL:** [Monetary Policy Transmission in Emerging Markets: Proverbial Concerns, Novel Evidence](https://www.imf.org/en/publications/wp/issues/2024/05/03/monetary-policy-transmission-in-emerging-markets-proverbial-concerns-novel-evidence-546642)

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## 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

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### 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.

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_Source: https://www.imf.org/en/publications/wp/issues/2024/05/03/monetary-policy-transmission-in-emerging-markets-proverbial-concerns-novel-evidence-546642_