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The impact of restrictive monetary policy in emerging countries

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  • Mishra, Akanksha
  • Dubey, Amlendu

Abstract

We study the sacrifice ratios for 465 disinflationary episodes in emerging market and developing economies using a dataset of 123 countries during 1979 to 2023. We find that average output cost of disinflation was significantly higher during COVID-19 period as compared to the previous disinflationary episodes, suggesting that supply side disruptions elevated the output costs of monetary tightening during the period. Further, we find that speed of disinflation and peak inflation significantly reduce sacrifice ratios suggesting a role for “cold turkey” approach as against the gradualism.

Suggested Citation

  • Mishra, Akanksha & Dubey, Amlendu, 2025. "The impact of restrictive monetary policy in emerging countries," Structural Change and Economic Dynamics, Elsevier, vol. 74(C), pages 915-927.
    • Handle: RePEc:eee:streco:v:74:y:2025:i:c:p:915-927
    DOI: 10.1016/j.strueco.2025.06.016
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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F60 - International Economics - - Economic Impacts of Globalization - - - General

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