Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/249952 
Year of Publication: 
2021
Citation: 
[Journal:] Review of Economic Perspectives [ISSN:] 1804-1663 [Volume:] 21 [Issue:] 3 [Publisher:] De Gruyter [Place:] Warsaw [Year:] 2021 [Pages:] 347-367
Publisher: 
De Gruyter, Warsaw
Abstract: 
Although measuring monetary policy is a contentious issue in the literature, much less evidence on this issue is available for emerging economies. This paper aims to investigate the role of interest rate and money supply in measuring monetary policy in twelve emerging economies that target inflation through the analysis of Granger causality, impulse response function, and forecast error variance decomposition. The empirical results show that both money supply and interest rate are useful predictors for changes in inflation. Moreover, both show a comparable power to explain the variation of inflation. However, a rise in interest rate increases rather than decreases inflation, whereas money supply has a positive and expected effect on inflation. These findings suggest that interest rate may not fully capture the overall stance of monetary policy or interest rate has a limited effect on inflation.
Subjects: 
monetary policy instruments
interest rate
money supply
emerging econo-mies
JEL: 
E51
E52
E53
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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