Financial Intermediation and Monetary Policy Transmission in EMEs: What Has Changed Post-2008 Crisis?

43 Pages Posted: 9 Mar 2016

See all articles by Madhusudan S. Mohanty

Madhusudan S. Mohanty

Bank for International Settlements (BIS) - Monetary and Economic Department

Kumar Rishabh

University of Basel

Date Written: March 2016

Abstract

In contrast to the benign neglect of the financial system in traditional monetary models, there has been growing evidence in recent years that the size and the structure of financial intermediation play a critical role in the transmission of monetary policy. This paper reviews the implications of three key post-2008 crisis developments in financial intermediation - the role of banks, the globalisation of debt markets and the sustained decline in global long-term interest rates - for various transmission channels of monetary policy in EMEs. The paper argues that the globalisation of debt markets means that monetary policy can no longer be conducted through the short-term interest rate alone. This raises questions about the appropriate instruments to be used for economic stabilisation in this new environment.

Keywords: financial intermediation, monetary policy, central banks

JEL Classification: E52, E58, G15

Suggested Citation

Mohanty, Madhusudan S. and Rishabh, Kumar, Financial Intermediation and Monetary Policy Transmission in EMEs: What Has Changed Post-2008 Crisis? (March 2016). BIS Working Paper No. 546, Available at SSRN: https://ssrn.com/abstract=2744836

Madhusudan S. Mohanty (Contact Author)

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Kumar Rishabh

University of Basel

Petersplatz 1
Basel, CH-4003
Switzerland

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