IDEAS home Printed from https://ideas.repec.org/p/bis/bisblt/32.html
   My bibliography  Save this paper

Monetary policy response in emerging market economies: why was it different this time?

Author

Listed:
  • Ana Aguilar
  • Carlos Cantú

Abstract

During the Covid-19-induced financial stress in March 2020, central banks in emerging market economies (EMEs) departed from their monetary policy playbook by cutting rates even in the face of sharp currency depreciations and massive capital outflows. Two factors were at play. First, the cyclical position of EMEs gave more room for easing of monetary policy, while structural changes improved the anchoring of inflation expectations and kept a lid on exchange rate pass-through. Second, the swift monetary policy easing by the Federal Reserve and other advanced economy central banks calmed global financial conditions. These policies capped the appreciation pressures on the US dollar, an EME risk factor, and gave EMEs greater room to cut interest rates. Monetary easing and asset purchases helped cushion the impact of portfolio outflows on local currency sovereign bond markets. Synchronised monetary and fiscal policies supported one another.

Suggested Citation

  • Ana Aguilar & Carlos Cantú, 2020. "Monetary policy response in emerging market economies: why was it different this time?," BIS Bulletins 32, Bank for International Settlements.
    • Handle: RePEc:bis:bisblt:32
    as

    Download full text from publisher

    File URL: https://www.bis.org/publ/bisbull32.pdf
    File Function: Full PDF document
    Download Restriction: no
    File URL: https://www.bis.org/publ/bisbull32.htm
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bis:bisblt:32. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Beslmeisl (email available below). General contact details of provider: https://edirc.repec.org/data/bisssch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.