Discussion Paper

No. 2013-61 | December 09, 2013
Monetary Policy Shocks and Macroeconomic Variables: Evidence from Fast Growing Emerging Economies


This paper investigates both the effects of domestic monetary policy and external shocks on fundamental macroeconomic variables in six fast growing emerging economies: Brazil, Russia, India, China, South Africa and Turkey—denoted hereafter as BRICS_T. The authors adopt a structural VAR model with a block exogeneity procedure to identify domestic monetary policy shocks and external shocks. Their research reveals that a contractionary monetary policy in most countries appreciates the domestic currency, increases interest rates, effectively controls inflation rates and reduces output. They do not find any evidence of the price, output, exchange rates and trade puzzles that are usually found in VAR studies. Their findings imply that the exchange rate is the main transmission mechanism in BRICS_T economies. The authors also find that that there are inverse J-curves in five of the six fast growing emerging economies and there are deviations from UIP (Uncovered Interest Parity) in response to a contractionary monetary policy in those countries. Moreover, world output shocks are not a dominant source of fluctuations in those economies.

Data Set

  • RATScode.RPF.txt
    [text/plain; charset=US-ASCII, 14K]
  • readme.docx
    list of abbreviations [application/vnd.openxmlformats-officedocument.wordprocessingml.document, 11K]
  • BRICS_T_data.xls
    data of BRICS-T countries 1995-2012 [application/vnd.ms-excel, 300K]

JEL Classification:

E52, E63, F14, F31, C51


  • Downloads: 8021


Cite As

Mehmet Ivrendi and Zekeriya Yildirim (2013). Monetary Policy Shocks and Macroeconomic Variables: Evidence from Fast Growing Emerging Economies. Economics Discussion Papers, No 2013-61, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2013-61

Comments and Questions

Anonymous - Referee Report
March 31, 2014 - 08:20

see attached file

Mehmet Ivrendi - Reply to Referee Report 1
April 17, 2014 - 14:44

See attached file