TY  - RPRT
        AU  - Ha, Jongrim
AU  - Kim, Dohan
AU  - Kose, M. Ayhan
AU  - Prasad, Eswar
        TI  - Resolving Puzzles of Monetary Policy Transmission in Emerging Markets
        PY  - 2024/Nov/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 17431
        UR  - https://www.iza.org/publications/dp17431
        AB  - Conventional empirical models of monetary policy transmission in emerging market economies produce puzzling results: monetary tightening often leads to an increase in prices (the price puzzle) and depreciation of the currency (the FX puzzle). We show that incorporating forward-looking expectations into standard open economy structural VAR models resolves these puzzles. Specifically, we augment the models with novel survey-based measures of expectations based on consumer, business, and professional forecasts. We find that the rise in prices following monetary tightening is related to currency depreciation, so eliminating the FX puzzle helps solve the price puzzle.
        KW  - prize puzzle
KW  - emerging market economies
KW  - monetary policy
KW  - foreign exchange puzzle
        ER  -