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Commodity Prices, Inflationary Pressures, and Monetary Policy: Evidence from BRICS Economies |
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| Authors: | Sushanta K Mallick Ricardo M Sousa |
| Institution: | 1. School of Business and Management, Queen Mary University of London, Mile End Road, London, E1 4NS, UK 2. Financial Markets Group (FMG), London School of Economics, Houghton Street, London, WC2 2AE, UK 3. Department of Economics and Economic Policies Research Unit (NIPE), University of Minho, Campus of Gualtar, 4710-057, Braga, Portugal |
| Abstract: | We assess the transmission of monetary policy and the impact of fluctuations in commodity prices on the real economy for the five biggest and fastest growing emerging market economies: Brazil, Russia, India, China and South Africa (BRICS). Using modern econometric techniques, we show that a monetary policy contraction has a negative effect on output, suggesting that it can lean against unexpected macroeconomic shocks even when the financial markets are not well-developed in this group of countries. We also uncover the importance of commodity price shocks, which lead to a rise in inflation and demand an aggressive behaviour from central banks towards inflation stabilisation. |
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