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REAL EFFECTS OF MONETARY POLICY IN LARGE EMERGING ECONOMIES

Published online by Cambridge University Press:  23 November 2011

Sushanta K. Mallick  and
Ricardo M. Sousa
Sushanta K. Mallick
Affiliation:
Queen Mary University of London
Ricardo M. Sousa*
Affiliation:
University of Minho and London School of Economics
*
Address correspondence to: Ricardo M. Sousa Department of Economics and Economic Policies Research Unit (NIPE), University of Minho, Campus of Gualtar, 4710-057 Braga, Portugal; e-mail: [email protected], [email protected].
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Abstract

This paper provides evidence on monetary policy transmission for five key emerging market economies: Brazil, Russia, India, China, and South Africa. Monetary policy (interest rate) shocks are identified using modern Bayesian methods along with the more recent sign restrictions approach. We find that contractionary monetary policy has a strong and negative effect on output. We also show that such contractionary monetary policy shocks do tend to stabilize inflation in these countries in the short term, while producing a strongly persistent negative effect on real equity prices. Overall, the impulse responses are robust to the alternative identification procedures.

Keywords

Monetary PolicyEmerging MarketsBVARSign Restrictions
Type
Articles
Information
Macroeconomic Dynamics , Volume 16 , Supplement S2: Time-Varying Modeling with Macroeconomic and Financial Data , September 2012 , pp. 190 - 212
Copyright
Copyright © Cambridge University Press 2011

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