February 2017 issue contents
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)

Online Appendix

a Johns Hopkins University 
b Social Sciences University of Ankara