Monetary Policy Transmission In Emerging Markets And Developing Economies

Author : Mr.Luis Brandao-Marques,Mr.R. G Gelos,Mr.Thomas Harjes,Ms.Ratna Sahay,Yi Xue
Publisher : International Monetary Fund
Page : 54 pages
File Size : 41,8 Mb
Release : 2020-02-21
Category : Business & Economics
ISBN : 9781513529738

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Monetary Policy Transmission in Emerging Markets and Developing Economies by Mr.Luis Brandao-Marques,Mr.R. G Gelos,Mr.Thomas Harjes,Ms.Ratna Sahay,Yi Xue Pdf

Central banks in emerging and developing economies (EMDEs) have been modernizing their monetary policy frameworks, often moving toward inflation targeting (IT). However, questions regarding the strength of monetary policy transmission from interest rates to inflation and output have often stalled progress. We conduct a novel empirical analysis using Jordà’s (2005) approach for 40 EMDEs to shed a light on monetary transmission in these countries. We find that interest rate hikes reduce output growth and inflation, once we explicitly account for the behavior of the exchange rate. Having a modern monetary policy framework—adopting IT and independent and transparent central banks—matters more for monetary transmission than financial development.

Author : Ila Patnaik,Ajay Shah,Rudrani Bhattacharya
Publisher : International Monetary Fund
Page : 27 pages
File Size : 55,7 Mb
Release : 2011-01-01
Category : Business & Economics
ISBN : 9781455211838

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Monetary Policy Transmission in an Emerging Market Setting by Ila Patnaik,Ajay Shah,Rudrani Bhattacharya Pdf

Some emerging economies have a relatively ineffective monetary policy transmission owing to weaknesses in the domestic financial system and the presence of a large and segmented informal sector. At the same time, small open economies can have a substantial monetary policy transmission through the exchange rate channel. In order to understand this setting, we explore a unified treatment of monetary policy transmission and exchangerate pass-through. The results for an emerging market, India, suggest that the most effective mechanism through which monetary policy impacts inflation runs through the exchange rate.

Author : Gill Hammond,S. M. Ravi Kanbur,Eswar Prasad
Publisher : Edward Elgar Publishing
Page : 369 pages
File Size : 53,5 Mb
Release : 2009-01-01
Category : Business & Economics
ISBN : 9781848449190

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Monetary Policy Frameworks for Emerging Markets by Gill Hammond,S. M. Ravi Kanbur,Eswar Prasad Pdf

Financial globalisation has made the formulation of monetary policy in emerging market economies increasingly complicated. This timely set of studies looks at the turmoil in global financial markets, which, coupled with volatile inflation, poses serious challenges for central banks in these countries. The book features a number of specially commissioned new papers from both front-line policymakers and researchers in developing and emerging market economies, which tackle the difficult issues currently being debated with increasing urgency by monetary policy theorists and policymakers around the world. They address questions such as: What monetary policy framework is most suitable for emerging market countries to confront the new challenges while they continue to open up to trade and financial flows? , What are the linkages between monetary stability and financial stability? and Is inflation targeting or a fixed exchange rate regime preferable for developing and emerging markets? Providing unique insights on the interaction between the theory and practice of monetary policy in emerging markets, this book will be of great interest to academics and students of economics, economic policy and development economics. Policymakers will also find this to be a useful and thought-provoking read.

Author : Mr.Ales Bulir,Mr.Jan Vlcek
Publisher : International Monetary Fund
Page : 37 pages
File Size : 44,9 Mb
Release : 2015-11-20
Category : Business & Economics
ISBN : 9781513554235

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Monetary Transmission by Mr.Ales Bulir,Mr.Jan Vlcek Pdf

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.

Author : Mr.Donal McGettigan,Mr.Kenji Moriyama,Mr.Jean F Noah Ndela Ntsama,Mr.Francois Painchaud,Mr.Haonan Qu,Mr.Chad Steinberg
Publisher : International Monetary Fund
Page : 30 pages
File Size : 55,7 Mb
Release : 2013-05-03
Category : Business & Economics
ISBN : 9781484388266

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Monetary Policy in Emerging Markets by Mr.Donal McGettigan,Mr.Kenji Moriyama,Mr.Jean F Noah Ndela Ntsama,Mr.Francois Painchaud,Mr.Haonan Qu,Mr.Chad Steinberg Pdf

In contrast to advanced markets (AMs), procyclical monetary policy has been a problem for emerging markets (EMs), with macroeconomic policies amplifying economic upswings and deepening downturns. The stark difference in policy has not been subject to extensive study and this paper attempts to address the gap. Key findings, using a large sample of EMs over the past 50 years, are: (i) EMs have adopted increasingly countercyclical monetary policy over time, although large differences remain among EMs and policies became more procyclical during the recent crisis. (ii) Inflation targeting and better institutions have been key factors behind the move to countercyclicality. (iii) Only deep financial markets allow EMs with flexible exchange rate regimes turn countercyclical. (iv) More countercyclical policy is associated with far less volatile output. The economically meaningful impact of IT on monetary policy countercyclicality and output variability is another reason in its favor, over and above better inflation outcomes.

Author : Chiara Fratto,Brendan Harnoys Vannier,MissBorislava Mircheva,David de Padua,Ms.Helene Poirson Ward
Publisher : International Monetary Fund
Page : 71 pages
File Size : 41,9 Mb
Release : 2021-01-22
Category : Business & Economics
ISBN : 9781513567211

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Unconventional Monetary Policies in Emerging Markets and Frontier Countries by Chiara Fratto,Brendan Harnoys Vannier,MissBorislava Mircheva,David de Padua,Ms.Helene Poirson Ward Pdf

The COVID-19 crisis induced an unprecedented launch of unconventional monetary policy through asset purchase programs (APPs) by emerging market and developing economies. This paper presents a new dataset of APP announcements and implementation from March until August 2020 for 27 emerging markets and 8 small advanced economies. APPs’ effects on bond yields, exchange rates, equities, and debt spreads are estimated using different methodologies. The results confirm that APPs were successful in significantly reducing bond yields in EMDEs, and these effects were stronger than those of policy rate cuts, suggesting that such UMP could be important tools for EMDEs during financial market stress.

Author : Nicoletta Batini
Publisher : Unknown
Page : 228 pages
File Size : 50,6 Mb
Release : 2007
Category : Developing countries
ISBN : UCSD:31822034527572

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Monetary Policy in Emerging Markets and Other Developing Countries by Nicoletta Batini Pdf

Over the past twenty years there has been a marked shift toward more flexible exchange rate regimes and more open capital accounts by both industrial and non-industrial economies. Two decades ago exchange rate pegs of various kinds accounted for over half of industrial country monetary policy regimes, but declined to just 5 percent of regimes by 2005, while in non-industrial countries the share fell from 75 percent to 55 percent. The move toward more flexibility in exchange rates has been accompanied by the adoption of a variety of frameworks to conduct monetary policy, ranging from inflation targeting, monetary targeting, and more eclectic approaches based on several targets. In industrial countries, exchange rate pegs and monetary targets have been replaced by regimes based on implicit or explicit inflation targets. In non-industrial countries, exchange rate pegs have also often been replaced by direct inflation targets, although many non-industrial countries still operate through somewhat eclectic regimes. This book is important read for understanding monetary policy under high capital mobility based on other countries' experiences.

Author : Mr.Jonathan David Ostry,Mr.Atish R. Ghosh,Mr.Marcos Chamon
Publisher : International Monetary Fund
Page : 25 pages
File Size : 47,8 Mb
Release : 2012-02-29
Category : Business & Economics
ISBN : 9781475554281

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Two Targets, Two Instruments by Mr.Jonathan David Ostry,Mr.Atish R. Ghosh,Mr.Marcos Chamon Pdf

Staff Discussion Notes showcase the latest policy-related analysis and research being developed by individual IMF staff and are published to elicit comment and to further debate. These papers are generally brief and written in nontechnical language, and so are aimed at a broad audience interested in economic policy issues. This Web-only series replaced Staff Position Notes in January 2011.

Author : Mr.Peter Montiel
Publisher : International Monetary Fund
Page : 30 pages
File Size : 41,5 Mb
Release : 1990-05-01
Category : Business & Economics
ISBN : 9781451972801

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The Transmission Mechanism for Monetary Policy in Developing Countries by Mr.Peter Montiel Pdf

In many developing countries the financial system is characterized by the absence of organized markets for securities and equities, by capital controls, and by legal ceilings on bank borrowing and lending rates, a situation which gives rise to parallel markets for foreign exchange and informal loan markets. This paper analyzes how changes in monetary policy instruments (bank credit, administered interest rates, required reserve ratios, and intervention in the parallel exchange market) are transmitted to domestic aggregate demand in a financially-repressed economy. Such an analysis is necessary to understand how the move to a more market-oriented system would affect the economy in the short run.

Author : Ms.Sonali Jain-Chandra,Ms.Filiz Unsal
Publisher : International Monetary Fund
Page : 19 pages
File Size : 52,6 Mb
Release : 2012-11-02
Category : Business & Economics
ISBN : 9781475579710

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The Effectiveness of Monetary Policy Transmission Under Capital Inflows by Ms.Sonali Jain-Chandra,Ms.Filiz Unsal Pdf

The effectiveness of the monetary policy transmission mechanism in open economies could be impaired if interest rates are driven primarily by global factors, especially during periods of large capital inflows. The main objective of this paper is to assess whether this is true for emerging Asia’s economies. Using a dynamic factor model and a structural vector auto-regression model, we show that long-term interest rates in Asia are indeed predominantly driven by global factors. However, monetary policy transmission mechanism remains effective in the region, as it operates predominantly through short-term interest rates. Nevertheless, the monetary transmission mechanism, though effective, is somewhat weaker in Asia during the periods of surges in capital inflows.

Author : Bank for International Settlements. Monetary and Economic Dept
Publisher : Unknown
Page : 539 pages
File Size : 42,5 Mb
Release : 2008
Category : Monetary policy
ISBN : 9291317519

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Transmission Mechanisms for Monetary Policy in Emerging Market Economies by Bank for International Settlements. Monetary and Economic Dept Pdf

Author : Woon Gyu Choi,Taesu Kang,Geun-Young Kim,Byongju Lee
Publisher : International Monetary Fund
Page : 31 pages
File Size : 48,8 Mb
Release : 2017-10-30
Category : Business & Economics
ISBN : 9781484325216

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Global Liquidity Transmission to Emerging Market Economies, and Their Policy Responses by Woon Gyu Choi,Taesu Kang,Geun-Young Kim,Byongju Lee Pdf

This paper distills and identifies global liquidity (GL) momenta from the macro-financial data of advanced economies through a factor model with sign restrictions as policy-driven, market-driven, and risk averseness factors. Using a panel factor-augmented VAR, we investigate responses of emerging market economies (EMEs) to GL shocks. A policy-driven liquidity increase boosts growth in EMEs, elevating stock prices and currency values, while a risk averseness rise has an opposite effect. A market-driven GL expansion boosts stock markets and lowers funding costs, promoting competitiveness and current account. Inflation targeting EMEs fare better than EMEs under alternative regimes with respect to macrofinancial volatility.

Author : Ms.Prachi Mishra,Mr.Peter Montiel,Mr.Antonio Spilimbergo
Publisher : International Monetary Fund
Page : 44 pages
File Size : 55,7 Mb
Release : 2010-10-01
Category : Business & Economics
ISBN : 9781455208883

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Monetary Transmission in Low Income Countries by Ms.Prachi Mishra,Mr.Peter Montiel,Mr.Antonio Spilimbergo Pdf

This paper reviews monetary transmission mechanisms in low-income countries (LICs) to identify aspects of the channels that may operate differently in LICs relative to advanced and emerging economies. Given the weak institutional frameworks, reduced role of securities markets, imperfect competition in the banking sector and the resulting high cost of bank lending to private firms, the traditional channels (interest rate, bank lending, and asset price) are impaired in LICs. The exchange rate channel is also undermined by central bank intervention in the foreign exchange market. These conclusions are supported by review of the institutional frameworks, statistical analysis, and previous literature.

Author : Nasha Ananchotikul,MissDulani Seneviratne
Publisher : International Monetary Fund
Page : 34 pages
File Size : 51,8 Mb
Release : 2015-09-28
Category : Business & Economics
ISBN : 9781513516233

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Monetary Policy Transmission in Emerging Asia by Nasha Ananchotikul,MissDulani Seneviratne Pdf

Given the heavy reliance on bank lending as the main source of financing in most Asian economies, banks could potentially play a pivotal role in monetary policy transmission. However, we find that Asia’s bank lending channel or, more broadly, credit channel of domestic monetary policy is not very strong at the aggregate level. Using bank-level data for nine Asian economies during 2000–2013, we show that heterogeneity of bank characteristics (e.g., ownership type, financial position), degree of foreign bank penetration of the domestic banking sector, and global financial conditions all have a bearing on the response of domestic credit to changes in domestic monetary policy, and may account for the apparently weak credit channel at aggregate level.

Author : Ms.Prachi Mishra,Mr.Peter Montiel
Publisher : International Monetary Fund
Page : 91 pages
File Size : 41,5 Mb
Release : 2012-06-01
Category : Business & Economics
ISBN : 9781475543803

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How Effective is Monetary Transmission in Low-Income Countries? A Survey of the Empirical Evidence by Ms.Prachi Mishra,Mr.Peter Montiel Pdf

This paper surveys the evidence on the effectiveness of monetary transmission in low-income countries. It is hard to come away from this review with much confidence in the strength of monetary transmission in such countries. We distinguish between the "facts on the ground" and "methodological deficiencies" interpretations of the absence of evidence for strong monetary transmission. We suspect that "facts on the ground" are an important part of the story. If this conjecture is correct, the stabilization challenge in developing countries is acute indeed, and identifying the means of enhancing the effectiveness of monetary policy in such countries is an important challenge.