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Monetary Policy Transmission in Emerging Markets: Proverbial Concerns, Novel Evidence

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  • Checo, Ariadne
  • Grigoli, Francesco
  • Sandri, Damiano

Abstract

Proverbial concerns remain about the effectiveness of monetary policy in emerging markets. The empirical evidence is scarce due to challenges in identifying monetary policy shocks. In this paper, we construct new monetary policy shocks using analysts' forecasts of policy rate decisions. Crucial for identification, analysts can update forecasts up to the policy meeting to incorporate any information relevant to the policy rate decision. Using these shocks, we show that monetary transmission wields considerable traction on financial and macroeconomic conditions in emerging markets. Monetary tightening lifts bond yields, curbs real activity, reduces inflation, and impacts leveraged firms more strongly.

Suggested Citation

  • Checo, Ariadne & Grigoli, Francesco & Sandri, Damiano, 2024. "Monetary Policy Transmission in Emerging Markets: Proverbial Concerns, Novel Evidence," CEPR Discussion Papers 18954, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18954
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    Cited by:

    1. is not listed on IDEAS
    2. Central Bank of the Republic of Türkiye, 2025. "The heterogeneous impact of monetary policy announcements on firms' financial outcomes," BIS Papers chapters, in: Bank for International Settlements (ed.), How can central banks take account of differences across households and firms for monetary policy?, volume 127, pages 295-330, Bank for International Settlements.
    3. Okan Akarsu & Mehmet Selman Colak & Hatice Karahan & Huzeyfe Torun, 2025. "The Heterogeneous Impact of Monetary Policy Announcements on Firms’ Financial Outcomes," Working Papers 2514, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.

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    Keywords

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    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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