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This article estimates monetary policy rules for two key emerging market economies: Brazil and China. It analyses whether the monetary authority reacts to changes in economic activity, financial markets, monetary conditions, the foreign exchange market and the commodity price. We assess the importance of nonlinearity using a smooth transition regression (STR) model. Using quarterly data over the time period 1990:1 to 2008:4, we find that considerations about the output gap and the real effective exchange rate (in the case of Brazil), and the inflation rate (for China) explain the nonlinear adjustment of the central bank rate. Moreover, the results suggest that central banks pursue a target range for the threshold variable rather than a specific point target. In the case of China, the McCallum rule shows that the GDP growth, the interest rate and the commodity price drive the response of the growth rate of the relevant monetary aggregate. [ABSTRACT FROM PUBLISHER]

This paper provides evidence on monetary policy transmission for five key emerging market economies: Brazil, Russia, India, China, and South Africa. Monetary policy (interest rate) shocks are identified using modern Bayesian methods along with the more recent sign restrictions approach. We find that contractionary monetary policy has a strong and negative effect on output. We also show that such contractionary monetary policy shocks do tend to stabilize inflation in these countries in the short term, while producing a strongly persistent negative effect on real equity prices. Overall, the impulse responses are robust to the alternative identification procedures. [ABSTRACT FROM AUTHOR]