COVID-19 UNCERTAINTY AND MONETARY POLICY RESPONSES: EVIDENCE FROM EMERGING MARKET ECONOMIES

K.P. Prabheesh (), Solikin Juhro and Cicilia A. Harun ()
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K.P. Prabheesh: Indian Institute of Technology Hyderabad
Cicilia A. Harun: Bank Indonesia

Bulletin of Monetary Economics and Banking, 2021, vol. 24, issue 4, 489-516

Abstract: This paper examines the effectiveness of monetary policy transmission in emerging economies during the COVID-19 outbreak. Using data from 14 emerging economies severely affected by the pandemic and the autoregressive distributed lag approach to cointegration, the study examines the effectiveness of monetary policy in affecting output, inflation, and credit. The study finds that: (1) In most economies, the monetary policy transmission to inflation is weakened due to the uncertainty created by the COVID-19 pandemic; (2) in a few economies, the transmission is found to be effective in stabilizing credit and output; and (3) the outbreak of the COVID-19 pandemic induced economic agents to follow a “cautionary” or “wait and see” approach.

Keywords: Monetary policy; Policy effectiveness; COVID-19; Pandemic; Uncertainty; Emerging economies (search for similar items in EconPapers)
JEL-codes: E52 E58 E65 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:24:y:2021:i:4a:p:489-516

DOI: 10.21098/bemp.v24i4.1692

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