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Commodity Prices, Inflationary Pressures, and Monetary Policy: Evidence from BRICS Economies

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  • Sushanta Mallick
  • Ricardo Sousa

Abstract

We assess the transmission of monetary policy and the impact of fluctuations in commodity prices on the real economy for the five biggest and fastest growing emerging market economies: Brazil, Russia, India, China and South Africa (BRICS). Using modern econometric techniques, we show that a monetary policy contraction has a negative effect on output, suggesting that it can lean against unexpected macroeconomic shocks even when the financial markets are not well-developed in this group of countries. We also uncover the importance of commodity price shocks, which lead to a rise in inflation and demand an aggressive behaviour from central banks towards inflation stabilisation. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Sushanta Mallick & Ricardo Sousa, 2013. "Commodity Prices, Inflationary Pressures, and Monetary Policy: Evidence from BRICS Economies," Open Economies Review, Springer, vol. 24(4), pages 677-694, September.
    • Handle: RePEc:kap:openec:v:24:y:2013:i:4:p:677-694
    DOI: 10.1007/s11079-012-9261-5
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    More about this item

    Keywords

    Monetary policy; Commodity prices; Emerging markets; Bayesian VAR; Sign Restrictions VAR; Panel VAR; E37; E52;
    All these keywords.

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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