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Monetary Policy Cyclicality in Emerging Economies

Author

Listed:
  • Kalemli-Özcan, Sebnem
  • De Leo, Pierre
  • Gopinath, Gita

Abstract

Conventional wisdom holds that monetary policy in emerging economies is procyclical, unlike in advanced economies. Using a large sample of countries from the mid-1990s onwards, we show that the conduct of monetary policy is not fundamentally different across these two groups of countries. Emerging and advanced economies alike lower their policy rates when economic activity decelerates, both unconditionally and following exogenous U.S. monetary policy tightening. We show that the common practice of using market rates, such as government bond rates, to proxy for the stance of monetary policy leads one to draw inaccurate conclusions about emerging economies' monetary policy cyclicality.

Suggested Citation

  • Kalemli-Özcan, Sebnem & De Leo, Pierre & Gopinath, Gita, 2022. "Monetary Policy Cyclicality in Emerging Economies," CEPR Discussion Papers 17748, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17748
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    More about this item

    Keywords

    Monetary policy; Emerging market economies; US monetary policy shocks;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F30 - International Economics - - International Finance - - - General

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