Conventional empirical models of monetary policy transmission in emerging market economies produce puzzling results: monetary tightening often leads to an increase in prices (the price puzzle) and depreciation of the currency (the foreign exchange puzzle). This paper shows that incorporating forward-looking expectations into standard open economy structural vector autoregressive models resolves these puzzles. Specifically, the models are augmented...
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2024/11/14
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Policy Research Working Paper
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WPS10974
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1
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2024/11/14
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Disclosed
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Resolving Puzzles of Monetary Policy Transmission in Emerging Markets
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Citation
Jongrim Ha; Dohan Kim; Ayhan Kose; Prasad,Eswar S..
Resolving Puzzles of Monetary Policy Transmission in Emerging Markets (English). Policy Research working paper;PROSPERITY Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/099317311142419883