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Monetary Policy and Economic Activity in the BRICS

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Abstract

This paper provides time-series and panel evidence on the monetary policy transmission for five key emerging market economies: Brazil, Russia, India, China and South Africa (BRICS). The analysis is based on a Bayesian vector auto-regression (VAR) model that includes seven key variables. Instead of the conventional Choleski decomposition as used in the literature, Bayesian methodology has been used to identify the monetary policy (positive interest rate) shock along with using the more recent sign restrictions approach. Finally, to summarise the response for this group of key emerging market economies, we carry out a panel VAR exercise, which provides further robustness of our finding that contractionary monetary policy has a negative effect on output. These results are robust to changes in the specification, the methodology and sub-sample time horizon.

Suggested Citation

  • Sushanta K. Mallick & Ricardo M. Sousa, 2009. "Monetary Policy and Economic Activity in the BRICS," NIPE Working Papers 27/2009, NIPE - Universidade do Minho.
    • Handle: RePEc:nip:nipewp:27/2009
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    File URL: http://www3.eeg.uminho.pt/economia/nipe/docs/2009/NIPE_WP_27_2009.pdf
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    Cited by:

    1. Adebayo Augustine Kutu & Harold Ngalawa, 2016. "Monetary Policy Shocks And Industrial Output In Brics Countries," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 66(3), pages 3-24, July-Sept.
    2. Margarit Monica-Ionelia, 2022. "Using The Bayesian Var In Monetary Policy Analysis: A Literature Review," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 212-216, February.

    More about this item

    Keywords

    monetary policy; emerging markets; BVAR; sign restrictions;
    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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