European Parliament Library

Monetary Policy in Emerging Markets :, Taming the Cycle, Donal McGettigan, Kenji Moriyama, Jean Noah Ndela Ntsama, Francois Painchaud, Haonan Qu, Chad Steinberg

Abstract
In contrast to advanced markets (AMs), procyclical monetary policy has been a problem for emerging markets (EMs), with macroeconomic policies amplifying economic upswings and deepening downturns. The stark difference in policy has not been subject to extensive study and this paper attempts to address the gap. Key findings, using a large sample of EMs over the past 50 years, are: (i) EMs have adopted increasingly countercyclical monetary policy over time, although large differences remain among EMs and policies became more procyclical during the recent crisis. (ii) Inflation targeting and better institutions have been key factors behind the move to countercyclicality. (iii) Only deep financial markets allow EMs with flexible exchange rate regimes turn countercyclical. (iv) More countercyclical policy is associated with far less volatile output. The economically meaningful impact of IT on monetary policy countercyclicality and output variability is another reason in its favor, over and above better inflation outcomes
Table Of Contents
Cover; Contents; I. Introduction; II. Literature Review; III. Analysis of Monetary Policy Cyclicality; Figure 1. Transitions; Figure 2. EM Transitions (Average of Rolling Correlations During Each Period); Figure 3. CoMP over Time; Figure 4. CoMP Distribution for AMs and EMs; Figure 5. Correlations and Estimated Response to Output Gaps in Taylor Rule; Figure 6. Density of Structural Break Year by Chow Test; IV. Determinants of Cyclicality; Figure 7. Comparison of Our CoMP Measures and Correlation Between Private Credit and Output Gap 1960-2009; TABLES; 1. Explaining CoMP in EMs
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (31 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781484310168

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