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

Ariadne Checo, Francesco Grigoli () and Damiano Sandri

No 1170, BIS Working Papers from Bank for International Settlements

Abstract: Doubts persist about the effectiveness of monetary transmission in emerging markets, but the empirical evidence is scarce due to challenges in identifying monetary policy shocks. In this paper, we construct new monetary policy shocks using novel analysts' forecasts of policy rate decisions. Crucial for identification, analysts can update forecasts up to the policy meeting, allowing them to incorporate any relevant data release. Using these shocks, we show that monetary transmission in emerging markets operates similarly to advanced economies. Monetary tightening leads to a persistent increase in bond yields, a contraction in real activity, and a delayed reduction in inflation. Furthermore, monetary policy impacts leveraged firms more strongly.

Keywords: monetary policy shocks; financial markets; emerging markets (search for similar items in EconPapers)
JEL-codes: E50 E52 (search for similar items in EconPapers)
Date: 2024-03
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fdg and nep-mon
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Related works:
Working Paper: Monetary Policy Transmission in Emerging Markets: Proverbial Concerns, Novel Evidence (2024)
Working Paper: Monetary Policy Transmission in Emerging Markets: Proverbial Concerns, Novel Evidence (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:1170

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