Global Shocks and Monetary Policy Transmission in Emerging Markets

Nuobu Renzhi () and John Beirne
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Nuobu Renzhi: Capital University of Economics and Business

No 726, ADB Economics Working Paper Series from Asian Development Bank

Abstract: This paper empirically examines the impact of global shocks on monetary policy transmission in 24 emerging market economies (EMEs), using panel local projections over the period 2000 to 2022. The estimated results show that adverse global shocks, namely a tighter United States monetary policy stance, higher global financial market uncertainty, and global climate change, could dampen the transmission of monetary policy in EMEs. Specifically, the overall responses of industrial production and inflation to monetary policy shocks are more muted compared to the case where the impacts of global factors are isolated. We also study whether economy-specific characteristics across EMEs affect the monetary policy transmission impacts of global shocks. The results suggest that a higher level of financial development can partially offset the dampening effects of global shocks, while a higher degree of capital account openness and trade openness further amplify the impact of global shocks.

Keywords: global shocks; monetary policy transmission; emerging market economies (search for similar items in EconPapers)
JEL-codes: E52 F40 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2024-05-10
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Journal Article: Global Shocks and Monetary Policy Transmission in Emerging Markets (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbewp:0726

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