Monetary Policy Transmission in Emerging Markets and Developing Economies PDF Download
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Author: Mr.Luis Brandao-Marques
Publisher: International Monetary Fund
ISBN: 1513529730
Category : Business & Economics
Languages : en
Pages : 54
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Book Description
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: Mr.Luis Brandao-Marques
Publisher: International Monetary Fund
ISBN: 1513529730
Category : Business & Economics
Languages : en
Pages : 54
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Book Description
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: Massimo Caruso
Publisher:
ISBN:
Category : Monetary policy
Languages : en
Pages : 52
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Book Description
Author: Mr. Roberto Cardarelli
Publisher: International Monetary Fund
ISBN: 1589067266
Category : Business & Economics
Languages : en
Pages : 37
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Book Description
This paper finds that the neutral interest rate has been on a downward trajectory in Morocco since the global financial crisis and may have fallen in the wake of the pandemic. In that context, monetary policy transmission to output and prices appears relatively muted given limited exchange rate flexibility until recently. Also, monetary policy transmission to some market rates has somewhat weakened in the wake of the pandemic. A lower natural rate and low policy rates raise the question of whether further rate reductions would impair the banking system. We find that the sensitivity of cash demand to deposit rates is low, implying limited risks that banks would lose funding with further reductions. A reliance on checking and savings accounts for funding may impair monetary pass-through, however. If monetary policy reaches its effective lower bound, limited and credible recourse to an asset purchase program could usefully complement conventional measures and strengthen monetary policy transmission under an inflation-targeting regime with a flexible exchange rate.
Author: Davide Furceri
Publisher: International Monetary Fund
ISBN: 1475568355
Category : Business & Economics
Languages : en
Pages : 43
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Book Description
This paper provides new evidence of the effect of monetary policy shocks on income inequality. Using a measure of unanticipated changes in policy rates for a panel of 32 advanced and emerging market countries over the period 1990-2013, the paper finds that contractionary (expansionary) monetary actions increase (reduce) income inequality. The effect, however, varies over time, depending on the type of the shocks (tightening versus expansionary monetary policy) and the state of the business cycle, and across countries depending on the share of labor income and redistribution policies. In particular, we find that the effect is larger for positive monetary policy shocks, especially during expansions. Looking across countries, we find that the effect is larger in countries with higher labor share of income and smaller redistribution policies. Finally, while an unexpected increase in policy rates increases inequality, changes in policy rates driven by an increase in growth are associated with lower inequality.
Author: Mr.Giovanni Dell'Ariccia
Publisher: International Monetary Fund
ISBN: 1484381130
Category : Business & Economics
Languages : en
Pages : 41
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Book Description
We present evidence of a risk-taking channel of monetary policy for the U.S. banking system. We use confidential data on the internal ratings of U.S. banks on loans to businesses over the period 1997 to 2011 from the Federal Reserve’s survey of terms of business lending. We find that ex-ante risk taking by banks (as measured by the risk rating of the bank’s loan portfolio) is negatively associated with increases in short-term policy interest rates. This relationship is less pronounced for banks with relatively low capital or during periods when banks’ capital erodes, such as episodes of financial and economic distress. These results contribute to the ongoing debate on the role of monetary policy in financial stability and suggest that monetary policy has a bearing on the riskiness of banks and financial stability more generally.
Author: Ms.Sonali Jain-Chandra
Publisher: International Monetary Fund
ISBN: 1475525826
Category : Business & Economics
Languages : en
Pages : 19
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Book Description
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: Ben S. Bernanke
Publisher: MIT Press
ISBN: 9780262523233
Category : Business & Economics
Languages : en
Pages : 398
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Book Description
Current issues in macroeconomics.
Author: Norman Loayza
Publisher:
ISBN:
Category : Monetary policy
Languages : en
Pages : 494
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Book Description
Author: Valentina Bonifacio
Publisher: International Monetary Fund
ISBN: 1513588850
Category : Business & Economics
Languages : en
Pages : 47
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Book Description
As central banks across the globe have responded to the COVID-19 shock by rounds of extensive monetary loosening, concerns about their inequality impact have grown. But rising inequality has multiple causes and its relationship with monetary policy is complex. This paper highlights the channels through which monetary policy easing affect income and wealth distribution, and presents some quantitative findings about their importance. Key takeaways are: (i) central banks should remain focused on macro stability while continuing to improve public communications about distributional effects of monetary policy, and (ii) supportive fiscal policies and structural reforms can improve macroeconomic and distributional outcomes.
Author: Ms.Deniz Igan
Publisher: International Monetary Fund
ISBN: 1484343506
Category : Business & Economics
Languages : en
Pages : 38
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Book Description
This paper evaluates the strength of the balance sheet channel in the U.S. monetary policy transmission mechanism over the past three decades. Using a Factor-Augmented Vector Autoregression model on an expanded data set, including sectoral balance sheet variables, we show that the balance sheets of various economic agents act as important links in the monetary policy transmission mechanism. Balance sheets of financial intermediaries, such as commercial banks, asset-backed-security issuers and, to a lesser extent, security brokers and dealers, shrink in response to monetary tightening, while money market fund assets grow. The balance sheet effects are comparable in magnitude to the traditional interest rate channel. However, their economic significance in the run-up to the recent financial crisis was small. Large increases in interest rates would have been needed to avert a rapid rise of house prices and an unsustainable expansion of mortgage credit, suggesting an important role for macroprudential policies.
