COVID-19 UNCERTAINTY AND MONETARY POLICY RESPONSES: EVIDENCE FROM EMERGING MARKET ECONOMIES

Harun, Cicilia Anggadewi and Juhro, Solikin M. and Prabheesh, K P (2022) COVID-19 UNCERTAINTY AND MONETARY POLICY RESPONSES: EVIDENCE FROM EMERGING MARKET ECONOMIES. Buletin Ekonomi Moneter dan Perbankan, 24 (4). pp. 489-516. ISSN 1410-8046

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Abstract

This paper examines the effectiveness of monetary policy transmission in emerging economies during the COVID-19 pandemic. Using data from 14 emerging economies severely affected by the pandemic and the autoregressive distributed lag approach to cointegration, the study examines the effectiveness of monetary policy in affecting output, inflation, and credit. The study finds that: (1) in most economies, the monetary policy transmission to inflation is weakened due to the uncertainty created by the COVID-19 pandemic; (2) in a few economies, the transmission is found to be effective in stabilizing credit and output; and (3) the outbreak of the COVID-19 pandemic induced economic agents to follow a “cautionary” or “wait-and-see” approach. © 2021 Buletin Ekonomi Moneter dan Perbankan. All rights reserved.

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