Transmission mechanisms for monetary policy in emerging market economies

Bank for International Settlements

No 35 in BIS Papers from Bank for International Settlements

Abstract: This volume, which is a follow-up to BIS Policy Paper No 3 (January 1998), analyses the major changes in monetary policy transmission in the emerging market economies (EMEs) over the past decade and highlights a number of implications. It is based on two days of discussions among senior central bankers at a meeting at the BIS in December 2006. Fiscal dominance has been largely overcome and monetary policy frameworks are now more credible. The overview paper finds that central banks have become more flexible in their operations. The interest rate channels of monetary policy have become much stronger, and the relative importance of some of the traditional channels such as the credit channel has declined, at least in normal times. Better monetary policies have resulted in lower and less volatile inflation in most EMEs. An analysis of the transmission of monetary policy to longterm interest rates notes that the impact of the policy rates on long-term rates has been moderated by more stable inflation expectations, which has allowed central banks to be less aggressive in adjusting policies. External factors appear to be exerting an increasing influence on domestic long-term rates. A related analysis finds that greater globalisation has resulted in domestic short-term rates being significantly affected by foreign interest rates, particularly in countries with high capital mobility and with managed exchange rates. Finally, the pass-through from exchange rate changes to domestic inflation has fallen since 2001, while the sensitivity of inflation to foreign price changes has increased.

Date: 2008 Written 2008-01
ISBN: 92-9131-751-9
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (61)

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Chapters in this book:

Monetary policy transmission in emerging market economies: what is new? , pp 1-59

Madhusudan Mohanty and Philip Turner

Monetary policy transmission and the long-term interest rate in emerging markets , pp 61-79

Ramon Moreno

Capital flows, exchange rate regime and monetary policy , pp 81-102

Sweta Saxena

Exchange rate pass-through in emerging market economies: what has changed and why? , pp 103-130

Dubravko Mihaljek and Marc Klau

Transmission mechanisms for monetary polidy in emerging market economies: what is new? , pp 131-137

Miguel Angel Pesce

Brazil: taming inflation expectations , pp 139-158

Afonso S Bevilaqua, Mário Mesquita and André Minella

The "great moderation" and the monetary transmission mechanism in Chile , pp 159-178

Cristina Betancour, Jose De Gregorio and Juan Medina

The monetary policy transmission mechanism in China , pp 179-181

Yi Gang

The transmission mechanism of monetary policy in Colombia: major changes and current features , pp 183-211

Hernando Vargas-Herrera

Notes on the monetary transmission mechanism in the Czech economy , pp 213-219

Ludek Niedermayer

The housing market channel of the monetary transmission mechanism in Hong Kong , pp 221-234

Hong Kong Monetary Authority

The Hungarian monetary transmission mechanism: an assessment , pp 235-257

Balázs Vonnák

Monetary policy transmission in India , pp 259-307

Rakesh Mohan

The transmission mechanisms of monetary policy in Indonesia , pp 309-332

Miranda S Goeltom

Exchange rate pass-through implications for monetary policy: the Israeli case , pp 333-343

Zvi Eckstein and Yoav Soffer

The monetary transmission mechanism in Malaysia: current developments and issues , pp 345-361

Ooi Sang Kuang

The monetary transmission mechanism in Mexico: recent developments , pp 363-394

José J. Sidaoui and Manuel Ramos-Francia

The monetary policy transmission mechanism under financial dollarisation: the case of Peru 1996-2006 , pp 395-412

Renzo Rossini and Marco Vega

Transmission mechanism of monetary policy in the Philippines , pp 413-425

Diwa C Guinigundo

The monetary transmission mechanism in Poland , pp 427-437

Jerzy Pruski and Piotr Szpunar

Monetary policy transmission mechanism in Saudi Arabia , pp 439-443

Muhammad Al-Jasser

The anchoring of inflation expectations in Singapore , pp 445-449

Hoe Ee Khor and Saktiandi Supaat

Changes in the monetary transmission mechanism in Thailand , pp 451-474

Bank of Thailand Monetary Policy Department

The monetary transmission mechanism in Turkey: new developments , pp 475-499

Erdem Basci, Özgür Özel and Cagri Sarikaya

The differential impact of real interest rates and credit availability on private investment: evidence from Venezuela , pp 501-537

Omar A Mendoza Lugo

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