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Monetary Transmission Of Global Imbalances In Asian Countries

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Executive Summary

The paper explores the linkages between the global and domestic monetary gaps, and estimates the effects of monetary gaps on output growth, inflation, and net saving rates using panel data for 20 Asian countries for 1980 - 2008. The authors find a significant pass-through of the global monetary gap to domestic monetary gaps, which in turn affect output growth and inflation, in individual emerging market and developing countries in Asia. Notably, they provide evidence that the global monetary condition is partly responsible for the current account surplus in Asia. They also draw implications for monetary policy coordination for global rebalancing.

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