IDEAS home Printed from https://ideas.repec.org/a/nea/journl/y2021i52p37-65.html
   My bibliography  Save this article

Transmission of monetary policy shocks in small open emerging market economies

Author

Listed:
  • Mamonov, M.

    (Institute for International Studies (IIS), MGIMO-University, Moscow, Russia
    CERGE-EI, Charles University and the Economics Institute of the Czech Academy of Sciences, Czech Republic)

  • Pestova, A.

    (Institute for International Studies (IIS), MGIMO-University, Moscow, Russia
    CERGE-EI, Charles University and the Economics Institute of the Czech Academy of Sciences, Czech Republic)

Abstract

In this paper, we compare the transmission of monetary policy shocks using quarterly data for 13 emerging market economies (EMEs) with that in a benchmark advanced open economy, the United Kingdom, in the periods of inflation targeting (from 1990s onward). To estimate the transmission within a given country, we specify a monetary VAR-model and we extend it with a variable reflecting commodities terms of trade. We identify monetary policy shocks using a sign restriction scheme: a restrictive shock is determined as an unexpected rise of policy rate and reduction of inflation (CPI) and money demand (M2). We apply the Bayesian approach to estimating VARs to address the curse of dimensionality. Our results indicate that monetary policy in EMEs is not less efficient comparable to the U.K.: restrictive monetary shocks decrease inflation but also lead to a slowdown of GDP and stock market outflows. Overall, our findings add to the debate on the real effects of monetary policy surprises with a special attention to a large set of EMEs.

Suggested Citation

  • Mamonov, M. & Pestova, A., 2021. "Transmission of monetary policy shocks in small open emerging market economies," Journal of the New Economic Association, New Economic Association, vol. 52(4), pages 37-65.
    • Handle: RePEc:nea:journl:y:2021:i:52:p:37-65
    DOI: 10.31737/2221-2264-2021-52-4-2
    as

    Download full text from publisher

    File URL: http://www.econorus.org/repec/journl/2021-52-37-65r.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.31737/2221-2264-2021-52-4-2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    monetary policy shocks; small open economies; emerging market economies; Bayesian VAR-models; sign restrictions;
    All these keywords.

    JEL classification:

    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nea:journl:y:2021:i:52:p:37-65. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alexey Tcharykov (email available below). General contact details of provider: https://edirc.repec.org/data/nearuea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.