Monetary Tightening without Disinflation? Cross-Country Evidence on Heterogeneous Transmission

This paper examines how institutional, fiscal, and external conditions shape monetary transmission in 40 economies over 1991–2022. Using forecast-based policy innovations and local projections, we estimate cumulative CPI price-level and real GDP responses. On average, monetary tightening produces a positive but imprecise price response and a modest, delayed output contraction. Heterogeneity is more pronounced for activity than for prices: GDP declines most clearly in flexible-regime emerging markets, whereas regime differences in price responses are generally weak. In joint moderator models, financial openness retains the clearest association with CPI responses, while emerging-market status and public debt matter most for GDP. Controlling for global risk through a shock–VIX interaction leaves these results essentially unchanged. No principal estimate yields a sufficiently precise price decline, precluding meaningful sacrifice ratios. The findings point to overlapping institutional and external influences rather than a single dominant transmission mechanism.