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Jain-Chandra, Sonali.

The Effectiveness of Monetary Policy Transmission Under Capital Inflows Evidence from Asia / Sonali Jain-Chandra. [electronic resource] : Sonali Jain-Chandra. - Washington, D.C. : International Monetary Fund, 2012. - 1 online resource (19 p.) - IMF Working Papers; Working Paper ; No. 12/265 . - IMF Working Papers; Working Paper ; No. 12/265 .

The effectiveness of the monetary policy transmission mechanism in open economies could be impaired if interest rates are driven primarily by global factors, especially during periods of large capital inflows. The main objective of this paper is to assess whether this is true for emerging Asia's economies. Using a dynamic factor model and a structural vector auto-regression model, we show that long-term interest rates in Asia are indeed predominantly driven by global factors. However, monetary policy transmission mechanism remains effective in the region, as it operates predominantly through short-term interest rates. Nevertheless, the monetary transmission mechanism, though effective, is somewhat weaker in Asia during the periods of surges in capital inflows.

ISBN: 1475525826 : 18.00 USD

ISSN: 1018-5941

Standard No.: 10.5089/9781475525823.001 doi

Subjects--Topical Terms:
Bond Yields
Dynamic Factor Model
Long-Term Interest Rates
Monetary Policy (Targets, Instruments, and Effects)
Monetary Policy Transmission
Open Economy Macroeconomics

Subjects--Geographic Terms:
China, People's Republic of
Hong Kong Special Administrative Region of China
Indonesia
Thailand
United States