Monetary Transmission: Are Emerging Market and Low Income Countries Different?

Ales Bulir and Jan Vlcek

No 2015/239, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; rate; central bank; Monetary transmission; yield curve; monetary policy rate; yield curve variability; bond rate movement; monetary policy regime; central bank action; central bank interest rate; well-behaved yield curve; yield-curve calculation; monetary policy action; monetary policy stance; interest rate move; yield curve pivot; Central bank rates; Interbank rates; Central bank policy rate; Inflation targeting; Africa (search for similar items in EconPapers)
Pages: 37
Date: 2015-11-20
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Monetary transmission: Are emerging market and low-income countries different? (2021)
Working Paper: Monetary Transmission: Are Emerging Market and Low-Income Countries Different? (2016)
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