Credit Channel of Monetary Policy Transmission Mechanism in BRICS

Abstract

The monetary policy is one of the most important issues in the world. After financial problems in capitalism system in the world the former communist countries had opportunities to accuse capitalism and introduce the new monetary system and monetary transmission. Brazil, Russia, India, China, and South Africa are the first with new banking system and monetary transmission. These new national fast growing economies formed on of the biggest transnational Balance Sheet Channel so called BRICS. These countries have the biggest share in the world but their influence in the world economic is less than their share. So, the new banking and monetary system changed the former World Bank system which was always criticized by the former communist countries and BRICS countries. The World Bank policies always has supported the capitalism system and capitalism countries. The former policies does not address the current and future economic developments of BRICS countries, However amount of their internationally economic involvements increased even more than 45%.The balance sheet in different countries is different base of the financial position of business and size of the market that different amount of funds gather from there and it make various funding channel among different countries. Therefore, different impacts on the countries will form the new type and size of firm in each country that are so different from each other. In fact this is mechanism of securing the investment in these countries by the description of the real economy through the clear decision making system in monetary policy transmission system. This study aims to show the effectiveness of new monetary policy in the last decades and review how credit channel transmission mechanism of monetary policies have conducted in these countries. The BRICS countries are the prime examples to show how such mechanism can be workable in these countries.

Keywords: Monetary policy, monetary transmission, balance sheet channel, BRICS