Aggregate Dynamics after a Shock to Monetary Policy in Developing Countries
by Emek Karacaa and Mustafa Tuganb
This paper investigates the effects from a shock to monetary
policy in developing economies under an inflationtargeting
regime. We find that price adjustment is fast in these
economies, causing the monetary policy shock to have less
persistent effects on output compared with those in advanced
economies. We show that a small open-economy model featuring
staggered wage setting with incomplete financial markets
is largely able to explain our findings.
JEL Codes: E23, E31, E52.
Full article (PDF, 36 pages, 357 kb)
a Johns Hopkins University
b Social Sciences University of Ankara