Monetary Policy Transmission in an Emerging Market Setting
Ila Patnaik (),
Ajay Shah () and
No 11/5, IMF Working Papers from International Monetary Fund
Some emerging economies have a relatively ineffective monetary policy transmission owing to weaknesses in the domestic financial system and the presence of a large and segmented informal sector. At the same time, small open economies can have a substantial monetary policy transmission through the exchange rate channel. In order to understand this setting, we explore a unified treatment of monetary policy transmission and exchangerate pass-through. The results for an emerging market, India, suggest that the most effective mechanism through which monetary policy impacts inflation runs through the exchange rate.
Keywords: Economic models; Emerging markets; Exchange rate pass-through; Exchange rates; Monetary transmission mechanism; Monetary policy; Monetary policy transmission, exchange rate, inflation, exchange rate pass, monetary transmission, (search for similar items in EconPapers)
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Working Paper: Monetary policy transmission in an emerging market setting (2011)
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