Monetary Policy Transmission in the Real Economy: 
A Cross-Country Comparison of Developed and Emerging Economies

Austine Nnamdi Okereke; Yunana Nancy Zigwai; Anih David Onyebuchi

doi:doi:10.11648/j.ijber.20261505.14

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Monetary Policy Transmission in the Real Economy: A Cross-Country Comparison of Developed and Emerging Economies

Austine Nnamdi Okereke^*

, Yunana Nancy Zigwai, Anih David Onyebuchi

Published in International Journal of Business and Economics Research (Volume 15, Issue 5)

Received: 25 May 2026 Accepted: 4 June 2026 Published: 23 October 2026

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Abstract

Monetary policy transmission varies systematically across development levels, yet empirical evidence on the magnitude and mechanisms of this heterogeneity remains fragmented. This paper examines cross-country differences in transmission strength by comparing empirical proxy structural vector autoregression (SVAR) estimates with predictions from a calibrated New Keynesian dynamic stochastic general equilibrium (DSGE) model. Using World Bank macroeconomic data for eleven economies from 2000 to 2023, five advanced economies (the United States, Germany, Japan, the United Kingdom, and France) and six emerging economies (Brazil, India, South Africa, Mexico, Indonesia, and Nigeria), we isolate exogenous lending rate shocks using Taylor-rule residuals as external instruments within a proxy SVAR framework. We benchmark the resulting impulse responses against a Gertler-Karadi banking model with financial frictions, calibrated separately for advanced and emerging economy parameters. Three main findings emerge. First, proxy SVAR identification attenuates the price puzzle and recovers transmission patterns that recursive Cholesky ordering obscures. Second, transmission is stronger in emerging economies: a 100-basis-point tightening raises unemployment by 0.27 percentage points at the seven-year horizon, compared with 0.09 percentage points in advanced economies. Third, the DSGE model systematically overpredicts transmission strength; for developed-economy unemployment, proxy SVAR recovers an empirical response magnitude 72 times larger than Cholesky identification, substantially narrowing the model-empirical gap. Nigeria illustrates structurally impaired transmission, where private credit at 11 percent of GDP proves insufficient to support conventional credit channels. These findings indicate that monetary policy alone cannot stabilize financially shallow economies. The paper informs the design of complementary policy frameworks that integrate interest rate policy with macroprudential instruments, capital flow management, and sequenced financial deepening strategies tailored to local institutional capacity.

Published in	International Journal of Business and Economics Research (Volume 15, Issue 5)
DOI	10.11648/j.ijber.20261505.14
Page(s)	151-163
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2026. Published by Science Publishing Group

Keywords

Monetary Policy Transmission, Proxy SVAR, Emerging Markets, Financial Frictions, DSGE Model, Nigeria

References

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[2]	Bank of England, 2024. About a rate of (general) interest: how monetary policy transmits. Quarterly Bulletin, July.
[3]	Bauer, M. D., Swanson, E. T., 2023. A reassessment of monetary policy surprises and high-frequency identification. NBER Macroeconomics Annual 37.
[4]	Bernanke, B. S., Gertler, M., 1995. Inside the black box: the credit channel of monetary policy transmission. Journal of Economic Perspectives 9(4), 27–48.
[5]	Cerutti, E., Claessens, S., Laeven, L., 2017. The use and effectiveness of macroprudential policies: new evidence. Journal of Financial Stability 28, 203–224.
[6]	Christiano, L. J., Eichenbaum, M., Evans, C., 1999. Monetary policy shocks: what have we learned and to what end? In: Taylor, J. B., Woodford, M. (Eds.), Handbook of Macroeconomics, vol. 1. Elsevier, Amsterdam, pp. 65–148.
[7]	Eickmeier, S., Hofmann, B., 2013. Monetary policy, housing booms, and financial (im)balances. Macroeconomic Dynamics 17(5), 830–860.
[8]	Gertler, M., Karadi, P., 2011. A model of unconventional monetary policy. Journal of Monetary Economics 58(1), 17–34.
[9]	Gertler, M., Karadi, P., 2015. Monetary policy surprises and the federal funds rate. Journal of Monetary Economics 58, 17–34.
[10]	Jarociński, M., Karadi, P., 2020. Deconstructing monetary policy surprises—the role of information shocks. American Economic Journal: Macroeconomics 12(2), 1–43.
[11]	Kalemli-Özcan, Ş., 2019. U.S. monetary policy and international risk spillovers. NBER Working Paper No. 26297. National Bureau of Economic Research, Cambridge, MA.
[12]	Mertens, K., Ravn, M. O., 2013. The dynamic effects of personal and corporate income tax changes in the United States. American Economic Review 103(4), 1212–1247.
[13]	Miranda-Agrippino, S., Ricco, G., 2021. The transmission of monetary policy shocks. American Economic Journal: Macroeconomics 13(3), 74–107.
[14]	Mishra, P., Montiel, P. J., 2012. How effective is monetary transmission in low-income countries? A survey of the empirical evidence. IMF Economic Review 60, 270–302.
[15]	Obstfeld, M., 2015. Trilemmas and trade-offs: living with financial globalisation. BIS Working Papers No. 480. Bank for International Settlements, Basel.
[16]	Obstfeld, M., 2021. Trilemmas and tradeoffs: living with financial globalization. In: Davis, S. J., Robinson, E. S., Yeung, B. (Eds.), The Asian Monetary Policy Forum: Insights for Central Banking. World Scientific Publishing, Singapore, pp. 16–84.
[17]	Rey, H., 2015. International channels of transmission of monetary policy and the Mundellian trilemma. IMF Economic Review 63(2), 283–310.

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Okereke, A. N., Zigwai, Y. N., Onyebuchi, A. D. (2026). Monetary Policy Transmission in the Real Economy: A Cross-Country Comparison of Developed and Emerging Economies. International Journal of Business and Economics Research, 15(5), 151-163. https://doi.org/10.11648/j.ijber.20261505.14

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ACS Style

Okereke, A. N.; Zigwai, Y. N.; Onyebuchi, A. D. Monetary Policy Transmission in the Real Economy: A Cross-Country Comparison of Developed and Emerging Economies. Int. J. Bus. Econ. Res. 2026, 15(5), 151-163. doi: 10.11648/j.ijber.20261505.14

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Okereke AN, Zigwai YN, Onyebuchi AD. Monetary Policy Transmission in the Real Economy: A Cross-Country Comparison of Developed and Emerging Economies. Int J Bus Econ Res. 2026;15(5):151-163. doi: 10.11648/j.ijber.20261505.14

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@article{10.11648/j.ijber.20261505.14,
  author = {Austine Nnamdi Okereke and Yunana Nancy Zigwai and Anih David Onyebuchi},
  title = {Monetary Policy Transmission in the Real Economy: 
A Cross-Country Comparison of Developed and Emerging Economies},
  journal = {International Journal of Business and Economics Research},
  volume = {15},
  number = {5},
  pages = {151-163},
  doi = {10.11648/j.ijber.20261505.14},
  url = {https://doi.org/10.11648/j.ijber.20261505.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20261505.14},
  abstract = {Monetary policy transmission varies systematically across development levels, yet empirical evidence on the magnitude and mechanisms of this heterogeneity remains fragmented. This paper examines cross-country differences in transmission strength by comparing empirical proxy structural vector autoregression (SVAR) estimates with predictions from a calibrated New Keynesian dynamic stochastic general equilibrium (DSGE) model. Using World Bank macroeconomic data for eleven economies from 2000 to 2023, five advanced economies (the United States, Germany, Japan, the United Kingdom, and France) and six emerging economies (Brazil, India, South Africa, Mexico, Indonesia, and Nigeria), we isolate exogenous lending rate shocks using Taylor-rule residuals as external instruments within a proxy SVAR framework. We benchmark the resulting impulse responses against a Gertler-Karadi banking model with financial frictions, calibrated separately for advanced and emerging economy parameters. Three main findings emerge. First, proxy SVAR identification attenuates the price puzzle and recovers transmission patterns that recursive Cholesky ordering obscures. Second, transmission is stronger in emerging economies: a 100-basis-point tightening raises unemployment by 0.27 percentage points at the seven-year horizon, compared with 0.09 percentage points in advanced economies. Third, the DSGE model systematically overpredicts transmission strength; for developed-economy unemployment, proxy SVAR recovers an empirical response magnitude 72 times larger than Cholesky identification, substantially narrowing the model-empirical gap. Nigeria illustrates structurally impaired transmission, where private credit at 11 percent of GDP proves insufficient to support conventional credit channels. These findings indicate that monetary policy alone cannot stabilize financially shallow economies. The paper informs the design of complementary policy frameworks that integrate interest rate policy with macroprudential instruments, capital flow management, and sequenced financial deepening strategies tailored to local institutional capacity.},
 year = {2026}
}

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TY  - JOUR
T1  - Monetary Policy Transmission in the Real Economy: 
A Cross-Country Comparison of Developed and Emerging Economies
AU  - Austine Nnamdi Okereke
AU  - Yunana Nancy Zigwai
AU  - Anih David Onyebuchi
Y1  - 2026/10/23
PY  - 2026
N1  - https://doi.org/10.11648/j.ijber.20261505.14
DO  - 10.11648/j.ijber.20261505.14
T2  - International Journal of Business and Economics Research
JF  - International Journal of Business and Economics Research
JO  - International Journal of Business and Economics Research
SP  - 151
EP  - 163
PB  - Science Publishing Group
SN  - 2328-756X
UR  - https://doi.org/10.11648/j.ijber.20261505.14
AB  - Monetary policy transmission varies systematically across development levels, yet empirical evidence on the magnitude and mechanisms of this heterogeneity remains fragmented. This paper examines cross-country differences in transmission strength by comparing empirical proxy structural vector autoregression (SVAR) estimates with predictions from a calibrated New Keynesian dynamic stochastic general equilibrium (DSGE) model. Using World Bank macroeconomic data for eleven economies from 2000 to 2023, five advanced economies (the United States, Germany, Japan, the United Kingdom, and France) and six emerging economies (Brazil, India, South Africa, Mexico, Indonesia, and Nigeria), we isolate exogenous lending rate shocks using Taylor-rule residuals as external instruments within a proxy SVAR framework. We benchmark the resulting impulse responses against a Gertler-Karadi banking model with financial frictions, calibrated separately for advanced and emerging economy parameters. Three main findings emerge. First, proxy SVAR identification attenuates the price puzzle and recovers transmission patterns that recursive Cholesky ordering obscures. Second, transmission is stronger in emerging economies: a 100-basis-point tightening raises unemployment by 0.27 percentage points at the seven-year horizon, compared with 0.09 percentage points in advanced economies. Third, the DSGE model systematically overpredicts transmission strength; for developed-economy unemployment, proxy SVAR recovers an empirical response magnitude 72 times larger than Cholesky identification, substantially narrowing the model-empirical gap. Nigeria illustrates structurally impaired transmission, where private credit at 11 percent of GDP proves insufficient to support conventional credit channels. These findings indicate that monetary policy alone cannot stabilize financially shallow economies. The paper informs the design of complementary policy frameworks that integrate interest rate policy with macroprudential instruments, capital flow management, and sequenced financial deepening strategies tailored to local institutional capacity.
VL  - 15
IS  - 5
ER  -

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Author Information

Austine Nnamdi Okereke

Research Department, Central Bank of Nigeria, Abuja, Nigeria

Contact Email

http://orcid.org/0009-0001-3151-3998
Yunana Nancy Zigwai

Research Department, Central Bank of Nigeria, Abuja, Nigeria

Contact Email
Anih David Onyebuchi

Research Department, Central Bank of Nigeria, Abuja, Nigeria

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APA Style

Okereke, A. N., Zigwai, Y. N., Onyebuchi, A. D. (2026). Monetary Policy Transmission in the Real Economy: A Cross-Country Comparison of Developed and Emerging Economies. International Journal of Business and Economics Research, 15(5), 151-163. https://doi.org/10.11648/j.ijber.20261505.14

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ACS Style

Okereke, A. N.; Zigwai, Y. N.; Onyebuchi, A. D. Monetary Policy Transmission in the Real Economy: A Cross-Country Comparison of Developed and Emerging Economies. Int. J. Bus. Econ. Res. 2026, 15(5), 151-163. doi: 10.11648/j.ijber.20261505.14

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AMA Style

Okereke AN, Zigwai YN, Onyebuchi AD. Monetary Policy Transmission in the Real Economy: A Cross-Country Comparison of Developed and Emerging Economies. Int J Bus Econ Res. 2026;15(5):151-163. doi: 10.11648/j.ijber.20261505.14

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@article{10.11648/j.ijber.20261505.14,
  author = {Austine Nnamdi Okereke and Yunana Nancy Zigwai and Anih David Onyebuchi},
  title = {Monetary Policy Transmission in the Real Economy: 
A Cross-Country Comparison of Developed and Emerging Economies},
  journal = {International Journal of Business and Economics Research},
  volume = {15},
  number = {5},
  pages = {151-163},
  doi = {10.11648/j.ijber.20261505.14},
  url = {https://doi.org/10.11648/j.ijber.20261505.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20261505.14},
  abstract = {Monetary policy transmission varies systematically across development levels, yet empirical evidence on the magnitude and mechanisms of this heterogeneity remains fragmented. This paper examines cross-country differences in transmission strength by comparing empirical proxy structural vector autoregression (SVAR) estimates with predictions from a calibrated New Keynesian dynamic stochastic general equilibrium (DSGE) model. Using World Bank macroeconomic data for eleven economies from 2000 to 2023, five advanced economies (the United States, Germany, Japan, the United Kingdom, and France) and six emerging economies (Brazil, India, South Africa, Mexico, Indonesia, and Nigeria), we isolate exogenous lending rate shocks using Taylor-rule residuals as external instruments within a proxy SVAR framework. We benchmark the resulting impulse responses against a Gertler-Karadi banking model with financial frictions, calibrated separately for advanced and emerging economy parameters. Three main findings emerge. First, proxy SVAR identification attenuates the price puzzle and recovers transmission patterns that recursive Cholesky ordering obscures. Second, transmission is stronger in emerging economies: a 100-basis-point tightening raises unemployment by 0.27 percentage points at the seven-year horizon, compared with 0.09 percentage points in advanced economies. Third, the DSGE model systematically overpredicts transmission strength; for developed-economy unemployment, proxy SVAR recovers an empirical response magnitude 72 times larger than Cholesky identification, substantially narrowing the model-empirical gap. Nigeria illustrates structurally impaired transmission, where private credit at 11 percent of GDP proves insufficient to support conventional credit channels. These findings indicate that monetary policy alone cannot stabilize financially shallow economies. The paper informs the design of complementary policy frameworks that integrate interest rate policy with macroprudential instruments, capital flow management, and sequenced financial deepening strategies tailored to local institutional capacity.},
 year = {2026}
}

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TY  - JOUR
T1  - Monetary Policy Transmission in the Real Economy: 
A Cross-Country Comparison of Developed and Emerging Economies
AU  - Austine Nnamdi Okereke
AU  - Yunana Nancy Zigwai
AU  - Anih David Onyebuchi
Y1  - 2026/10/23
PY  - 2026
N1  - https://doi.org/10.11648/j.ijber.20261505.14
DO  - 10.11648/j.ijber.20261505.14
T2  - International Journal of Business and Economics Research
JF  - International Journal of Business and Economics Research
JO  - International Journal of Business and Economics Research
SP  - 151
EP  - 163
PB  - Science Publishing Group
SN  - 2328-756X
UR  - https://doi.org/10.11648/j.ijber.20261505.14
AB  - Monetary policy transmission varies systematically across development levels, yet empirical evidence on the magnitude and mechanisms of this heterogeneity remains fragmented. This paper examines cross-country differences in transmission strength by comparing empirical proxy structural vector autoregression (SVAR) estimates with predictions from a calibrated New Keynesian dynamic stochastic general equilibrium (DSGE) model. Using World Bank macroeconomic data for eleven economies from 2000 to 2023, five advanced economies (the United States, Germany, Japan, the United Kingdom, and France) and six emerging economies (Brazil, India, South Africa, Mexico, Indonesia, and Nigeria), we isolate exogenous lending rate shocks using Taylor-rule residuals as external instruments within a proxy SVAR framework. We benchmark the resulting impulse responses against a Gertler-Karadi banking model with financial frictions, calibrated separately for advanced and emerging economy parameters. Three main findings emerge. First, proxy SVAR identification attenuates the price puzzle and recovers transmission patterns that recursive Cholesky ordering obscures. Second, transmission is stronger in emerging economies: a 100-basis-point tightening raises unemployment by 0.27 percentage points at the seven-year horizon, compared with 0.09 percentage points in advanced economies. Third, the DSGE model systematically overpredicts transmission strength; for developed-economy unemployment, proxy SVAR recovers an empirical response magnitude 72 times larger than Cholesky identification, substantially narrowing the model-empirical gap. Nigeria illustrates structurally impaired transmission, where private credit at 11 percent of GDP proves insufficient to support conventional credit channels. These findings indicate that monetary policy alone cannot stabilize financially shallow economies. The paper informs the design of complementary policy frameworks that integrate interest rate policy with macroprudential instruments, capital flow management, and sequenced financial deepening strategies tailored to local institutional capacity.
VL  - 15
IS  - 5
ER  -

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