Aggregate Dynamics after a Shock to Monetary Policy in Developing Countries

Emek Karaca and Mustafa Tugan
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Emek Karaca: Johns Hopkins University
Mustafa Tugan: Social Sciences University of Ankara

International Journal of Central Banking, 2017, vol. 13, issue 1, 261-296

Abstract: This paper investigates the effects from a shock to monetary policy in developing economies under an inflationtargeting regime. We find that price adjustment is fast in these economies, causing the monetary policy shock to have less persistent effects on output compared with those in advanced economies. We show that a small open-economy model featuring staggered wage setting with incomplete financial markets is largely able to explain our findings.

Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2017:q:0:a:7

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