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Aggregate Dynamics after a Shock to Monetary Policy in Developing Countries

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  • Emek Karaca

    (Johns Hopkins University)

  • Mustafa Tugan

    (Social Sciences University of Ankara)

Abstract

This paper investigates the effects from a shock to monetary policy in developing economies under an inflationtargeting regime. We find that price adjustment is fast in these economies, causing the monetary policy shock to have less persistent effects on output compared with those in advanced economies. We show that a small open-economy model featuring staggered wage setting with incomplete financial markets is largely able to explain our findings.

Suggested Citation

  • Emek Karaca & Mustafa Tugan, 2017. "Aggregate Dynamics after a Shock to Monetary Policy in Developing Countries," International Journal of Central Banking, International Journal of Central Banking, vol. 13(1), pages 261-296, February.
    • Handle: RePEc:ijc:ijcjou:y:2017:q:0:a:7
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    References listed on IDEAS

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    Cited by:

    1. Cameron Haas & Mateo Hoyos & Emiliano Libman & Guilherme K. Martins & Arslan Razmi, 2025. "Monetary Shocks and Inflation: Global Evidence from Trilemma-Based Identification," Working Papers DTE 650, CIDE, División de Economía.

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