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Global Shocks and Monetary Policy Transmission in Emerging Markets

Author

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  • Renzhi, Nuobu

    (Capital University of Economics and Business)

  • Beirne , John

    (Asian Development Bank)

Abstract

This paper empirically examines the impact of global shocks on monetary policy transmission in 24 emerging market economies (EMEs), using panel local projections over the period 2000 to 2022. The estimated results show that adverse global shocks, namely a tighter United States monetary policy stance, higher global financial market uncertainty, and global climate change, could dampen the transmission of monetary policy in EMEs. Specifically, the overall responses of industrial production and inflation to monetary policy shocks are more muted compared to the case where the impacts of global factors are isolated. We also study whether economy-specific characteristics across EMEs affect the monetary policy transmission impacts of global shocks. The results suggest that a higher level of financial development can partially offset the dampening effects of global shocks, while a higher degree of capital account openness and trade openness further amplify the impact of global shocks.

Suggested Citation

  • Renzhi, Nuobu & Beirne , John, 2024. "Global Shocks and Monetary Policy Transmission in Emerging Markets," ADB Economics Working Paper Series 726, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0726
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    Cited by:

    1. Pei-Fen, Chen & Mei-Ping, Chen & Min-Syu, Lin & Chingnun, Lee, 2025. "Cross-border transmission effect of China's monetary policy on the exchange rate of Asia-Pacific economies," International Review of Financial Analysis, Elsevier, vol. 97(C).
    2. Cheng, Penghao & You, Yu, 2025. "U.S. monetary policy spillovers to emerging market countries: Responses to cost-push and natural rate shocks," Economic Modelling, Elsevier, vol. 143(C).
    3. Keoudone Keothephar & Khamfong Sivongxay & Thonemy Keokinnaly & Vilayvanh Srithilat, 2025. "Monetary Policy Effectiveness and Inflation Dynamics in a Dollarized Economy: Fresh insight from Laos," International Journal of Science and Business, IJSAB International, vol. 46(1), pages 15-28.

    More about this item

    Keywords

    global shocks; monetary policy transmission; emerging market economies;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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