{
  "title": "When Policy Bites: State-Dependent Monetary Policy Transmission in Emerging Markets",
  "publication": "IMF Working Papers, May 15, 2026",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2026/05/14/when-policy-bites-state-dependent-monetary-policy-transmission-in-emerging-markets-576113",
  "canonical": "https://www.imf.org/en/publications/wp/issues/2026/05/14/when-policy-bites-state-dependent-monetary-policy-transmission-in-emerging-markets-576113",
  "overlayPath": "/en/publications/wp/issues/2026/05/14/when-policy-bites-state-dependent-monetary-policy-transmission-in-emerging-markets-576113/index.md",
  "summary": "We document the state-dependence of monetary policy transmission to output and core consumer prices in a sample of eleven large inflation-targeting emerging markets along three cyclical dimensions: the business cycle position, the monetary policy stance, and the level of trend inflation.",
  "sections": [
    {
      "heading": "Main findings",
      "content": "- Study documents state-dependence of monetary policy transmission to output and core consumer prices in a sample of eleven large inflation-targeting emerging markets.\n- Monetary policy has strong effects on output:\n  - During recessions.\n  - After a period of loose monetary policy.\n- Monetary policy has little to no impact on output:\n  - During expansions.\n  - When monetary policy has been tight.\n- Response of prices is muted regardless of:\n  - Business cycle position.\n  - Monetary policy stance.\n- Transmission depends on trend inflation:\n  - When trend inflation is low, monetary policy has a stronger impact on output and a weaker effect on prices.\n  - When trend inflation is high, output response is dampened and price adjustments are amplified."
    },
    {
      "heading": "Mechanisms and interpretation",
      "content": "- Findings are broadly consistent with the presence of:\n  - Financial frictions in the form of occasionally binding borrowing constraints.\n  - Endogenous frequency of price adjustments.\n  - Loss aversion preferences.\n  - A convex Phillips Curve."
    },
    {
      "heading": "Policy implications",
      "content": "- Monetary policy effectiveness on output is state-dependent; levers are more potent in recessions and following loose policy episodes.\n- Price responses are relatively muted across business cycle and policy stance states, suggesting limited near-term inflationary sensitivity except when trend inflation is high.\n- Consideration of trend inflation regimes is important for calibrating expected trade-offs between output stabilization and price stability.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2026/05/14/when-policy-bites-state-dependent-monetary-policy-transmission-in-emerging-markets-576113"
    }
  ],
  "bullets": [
    "[Markdown version](/en/publications/wp/issues/2026/05/14/when-policy-bites-state-dependent-monetary-policy-transmission-in-emerging-markets-576113/index.md)",
    "[Structured JSON version](/en/publications/wp/issues/2026/05/14/when-policy-bites-state-dependent-monetary-policy-transmission-in-emerging-markets-576113/index.json)",
    "[Bundle manifest](/en/publications/wp/issues/2026/05/14/when-policy-bites-state-dependent-monetary-policy-transmission-in-emerging-markets-576113/bundle-manifest.json)",
    "Authors: Lucyna Gornicka, Sumaiyah R Mirza, Vina Nguyen, Jerome Vandenbussche",
    "Published: May 15, 2026",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798229046084.001",
    "Study documents state-dependence of monetary policy transmission to output and core consumer prices in a sample of eleven large inflation-targeting emerging markets.",
    "Monetary policy has strong effects on output:",
    "Monetary policy has little to no impact on output:",
    "Response of prices is muted regardless of:",
    "Transmission depends on trend inflation:",
    "Findings are broadly consistent with the presence of:",
    "Monetary policy effectiveness on output is state-dependent; levers are more potent in recessions and following loose policy episodes.",
    "Price responses are relatively muted across business cycle and policy stance states, suggesting limited near-term inflationary sensitivity except when trend inflation is high.",
    "Consideration of trend inflation regimes is important for calibrating expected trade-offs between output stabilization and price stability.",
    "**Working Paper**"
  ],
  "related": [
    {
      "title": "Working Paper",
      "role": "paper",
      "sourceUrl": "https://www.imf.org/-/media/files/publications/wp/2026/english/wpiea2026096-source-pdf.pdf",
      "summary": {
        "path": "/-/media/files/publications/wp/2026/english/wpiea2026096-source-pdf.pdf.md",
        "mime": "text/markdown"
      },
      "binary": {
        "path": "/-/media/files/publications/wp/2026/english/wpiea2026096-source-pdf.pdf",
        "mime": "application/pdf"
      }
    }
  ],
  "alternates": {
    "markdown": "/en/publications/wp/issues/2026/05/14/when-policy-bites-state-dependent-monetary-policy-transmission-in-emerging-markets-576113/index.md",
    "json": "/en/publications/wp/issues/2026/05/14/when-policy-bites-state-dependent-monetary-policy-transmission-in-emerging-markets-576113/index.json",
    "bundleManifest": "/en/publications/wp/issues/2026/05/14/when-policy-bites-state-dependent-monetary-policy-transmission-in-emerging-markets-576113/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-17T03:24:50.579Z"
}