Heterogeneous Adjustment in Monetary Transmission: Short-Run Evidence from an Emerging Market on Policy Signals in Bank Equity Valuations, Balance Sheets, and Inflation

This paper examines the short-run dynamics of monetary policy transmission in a bank-dominated emerging economy, with a particular focus on the relative timing of adjustments across bank equity valuations, balance-sheet aggregates, and inflation. Using monthly data over the period 2018–2024, the analysis relies on a reduced-form VAR framework. The results indicate that monetary policy innovations, interpreted as informational signals, are more visibly reflected in bank equity valuations—proxied by the MASI banking index—at short horizons, while balance-sheet aggregates exhibit more limited and less persistent adjustments. Inflation dynamics remain difficult to identify clearly within the short-run horizon, consistent with the slow-moving nature of price adjustments. These findings are consistent with a configuration in which policy-related information is first incorporated into financial valuations before being gradually reflected in credit and macroeconomic variables. This pattern is interpreted as reflecting heterogeneous adjustment speeds rather than a causal transmission sequence. The contribution of the paper is to document these heterogeneous short-run adjustment patterns within a unified empirical framework, highlighting the importance of temporal dynamics in the analysis of monetary transmission.