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Monetary policy options for mitigating the impact of the global financial crisis on emerging market economies

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  • Dąbrowski, Marek A.
  • Śmiech, Sławomir
  • Papież, Monika

Abstract

Though the hypothesis that exchange rate regimes fully predetermine monetary policy in the face of external shocks hardly finds any advocates in the field of theory, it has crept into empirical research. This study adopts a careful and rigorous empirical approach that looks at monetary policy options used in order to accommodate the global financial crisis. We examine the GDP growth in 41 emerging market economies in the most intense phase of the crisis and confirm that there is no clear difference in the growth performance between countries at the opposite poles of the exchange rate regime spectrum. Moreover, we find that the monetary policy option of depreciation cum international reserves depletion outperforms other options, especially the rise in the interest rate spread. We also discover certain complementarities between information on policy option and on exchange rate regime. We use quantile regression, which provides a more complete picture of the relationships between the covariates and the distribution of the GDP growth.

Suggested Citation

  • Dąbrowski, Marek A. & Śmiech, Sławomir & Papież, Monika, 2015. "Monetary policy options for mitigating the impact of the global financial crisis on emerging market economies," Journal of International Money and Finance, Elsevier, vol. 51(C), pages 409-431.
  • Handle: RePEc:eee:jimfin:v:51:y:2015:i:c:p:409-431
    DOI: 10.1016/j.jimonfin.2014.12.006
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    Cited by:

    1. Scott Davis, 2016. "Economic fundamentals and monetary policy autonomy," Globalization Institute Working Papers 267, Federal Reserve Bank of Dallas, revised 24 Feb 2016.
    2. Jonathan Scott Davis, 2017. "External debt and monetary policy autonomy," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República - ESPE, vol. 35(82), pages 53-63, April.
    3. Marek A. Dąbrowski & Monika Papież & Sławomir Śmiech, 2020. "Classifying de facto exchange rate regimes of financially open and closed economies: A statistical approach," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 29(7), pages 821-849, October.
    4. Dąbrowski, Marek A. & Wróblewska, Justyna, 2016. "Exchange rate as a shock absorber in Poland and Slovakia: Evidence from Bayesian SVAR models with common serial correlation," Economic Modelling, Elsevier, vol. 58(C), pages 249-262.
    5. Atilgan, Yigit & Demirtas, K. Ozgur & Simsek, Koray D., 2016. "Derivative markets in emerging economies: A survey," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 88-102.
    6. Halit Gonenc & Silviu Ursu, 2018. "The Asset Growth Effect and Investor Protection in Emerging Markets: The Role of the Global Financial Crisis," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(3), pages 491-507, February.
    7. Chee-Hong Law & Chee-Lip Tee & Wei-Theng Lau, 2019. "The Impacts of Financial Integration on the Linkages Between Monetary Independence and Foreign Exchange Reserves," International Economic Journal, Taylor & Francis Journals, vol. 33(2), pages 212-235, April.
    8. repec:bdr:ensayo:v:35:y:2017:i:82:p:96-105 is not listed on IDEAS
    9. Dąbrowski, Marek A., 2019. "A new approach to estimation of actively managed component of foreign exchange reserves," MPRA Paper 95280, University Library of Munich, Germany.

    More about this item

    Keywords

    Global financial crisis; Emerging market economies; Monetary policy; Exchange rate regime; Quantile regressions;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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