Monetary Policy, Exchange Rate Dynamics, and Inflation in Emerging Asian Economies

This study examines the determinants of inflation in eight emerging Asian economies Bangladesh, India, Pakistan, Sri Lanka, Indonesia, Malaysia, Thailand, and the Philippines over the period 2000–2023. Using a comprehensive panel dataset, we analyze the effects of monetary policy instruments, exchange rate dynamics, macroeconomic controls, and labor market variables on inflation. Employing static (pooled OLS, fixed and random effects), dynamic (System GMM), and long-run (FMOLS and DOLS) panel methods, alongside Granger causality and extensive robustness checks, the study provides a rigorous and methodologically integrated assessment. The results indicate that broad money growth and real interest rates are the primary drivers of inflation, while nominal interest rates, exchange rate depreciation, economic growth, unemployment, and trade openness exert secondary but significant influences. Policy implications suggest prioritizing monetary policy, stabilizing exchange rates, promoting growth-oriented interventions, leveraging structural labor and trade policies, and strengthening institutional credibility. The study contributes theoretically by extending the monetary approach to inflation with structural and external considerations and empirically by providing multi-country evidence from emerging Asia, offering actionable insights for central banks and policymakers.