Fitting and forecasting of nonlinear Taylor rule in China

2015 ◽  
Vol 5 (4) ◽  
pp. 402-420 ◽  
Author(s):  
Guobing Wu ◽  
Hao Zhang ◽  
Ping Chen
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Prediction Accuracy ◽  
Prediction Models ◽  
Taylor Rule ◽  
Prediction Method ◽  
Monetary Policies ◽  
Content Type ◽  
Taylor Rules ◽  
Non Linear

Purpose – In this paper, six forms of non-linear Taylor rule have been applied to compare the fitting and prediction of response function of monetary policy of China, in an attempt to figure out a form of non-linear Taylor rule that accords with Chinese practices. The paper aims to discuss this issue. Design/methodology/approach – In this paper, the authors will conduct in-sample fitting and out-of-sample prediction on the response function of monetary policy of China by introducing the factor of exchange rate and by applying forward-looking, backward-looking and within-quarters non-linear Taylor rule with data from the first quarter of 1994 to the second quarter of 2011, with a view to provide reference for formulation and implementation of monetary policies of China. Findings – By analyzing the experimental data, the authors find that first, after introducing the factor of exchange rate, both the implementation effect and prediction ability of the monetary policies improve. Exchange rate has a relatively greater influence on the effect of the monetary policies during low inflation period. Introduction of exchange rate can improve the prediction accuracy of our monetary policies significantly. Second, as the implementation effect of monetary policy under different macro-background varies greatly, the situation should be correctly appraised when formulating and implementing monetary policies. According to the empirical results, the monetary policies have obvious non-linear characteristics, and transit smoothly with the change of inflation rate. On the two sides of inflation rate of 2.174 percent, there is an asymmetry response. Research limitations/implications – Surely, the conclusions are reached on the basis of quarterly data and one-step prediction method. It is no doubt that use of frequency mixing data including quarterly and monthly data will provide more sample information for studying relevant issues. And the use of multiple-step prediction method may cause a dynamic change of prediction indicators of models, which will help choose more appropriate prediction models. That is what the authors will study next. Originality/value – First, by introducing exchange rate, this paper will extend non-linear Taylor rules and test its applicability and fitting effect in China. Second, figure out a non-linear Taylor rule that conforms to Chinese practices with data. In this paper, multiple forms of non-linear Taylor rules and actual macro date will be adopted for fitting and finding out a non-linear Taylor rule that fits Chinese practices. Third, empirical basis will be provided for further perfecting monetary policies prediction models. As there are few studies in connection with the prediction accuracy of non-linear Taylor rules so far, this paper will compare and study the prediction accuracy of non-linear Taylor rules by utilizing multiple advanced prediction techniques, so as to offer a beneficial thinking for predicting and formulating monetary policies by the central bank.

scholarly journals MONETARY POLICY RULES IN MALAYSIA, SINGAPORE AND THAILAND

2020 ◽  
Vol 23 (4) ◽  
pp. 565-596
Author(s):  
Chai-Thing Tan ◽  
Azali Mohamed
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Government Spending ◽  
Taylor Rule ◽  
Central Banks ◽  
Monetary Policies ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
The Exchange Rate ◽  
Monetary Policy Reaction Function

This paper investigates whether monetary policies in Malaysia, Thailand and Singapore are best represented by either the Taylor rule or the augmented Taylor rule. It finds that the augmented Taylor rule, which incorporates the exchange rate and government spending, best represents monetary policies in these countries. The results show that past inflation and the output gap play a role in the monetary policy reaction function in Malaysia and Thailand. The results further show a strong preference towards interest rate smoothing, government spending, and the exchange rate by the central banks.

Beijing will move cautiously on exchange rate

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Unintended Consequence ◽  
Exchange Rate Policy ◽  
Market Volatility ◽  
Capital Flight ◽  
Stock Market Volatility ◽  
Monetary Policies ◽  
Content Type ◽  
Rate Policy

Subject China's exchange rate policy. Significance The fallout from the recent currency and stock market volatility has heightened fears that China's monetary policy decisions are reactive and uncoordinated. In response to the threat of capital flight, monetary policy has tended towards control, but these controls are increasingly costly, both in monetary and welfare terms. In assessing these costs, however, distinction must be made between using reserves to defend the renminbi's value, legitimate policy-supported outward investment and capital flight. Impacts Even without devaluation, exported deflation will be an unintended consequence of China's current monetary policies. Officials are well aware of the dangers posed by a substantial once-off Plaza Accord-style devaluation. A large devaluation would damage the renminbi's prospects as an international reserve and settlement currency. Devaluation would have a significant impact on the monetary policy of other countries, most notably Japan.

Sukuk and monetary policy transmission in Indonesia: the role of asset price and exchange rate channels

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Suriani Suriani ◽  
M. Shabri Abd. Majid ◽  
Raja Masbar ◽  
Nazaruddin A. Wahid ◽  
Abdul Ghafar Ismail
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rates ◽  
Asset Price ◽  
Transmission Mechanism ◽  
Monetary Policy Transmission ◽  
Content Type ◽  
Policy Transmission ◽  
Monetary Policy Transmission Mechanism

Purpose The purpose of this study is to empirically analyze the role of sukuk in the monetary policy transmission mechanism through the asset price and exchange rate channels in the Indonesian economy. Design/methodology/approach Using the monthly data from January 2003 to November 2017, this study uses a multivariate vector error correction model causality framework. To examine the role of sukuk in the monetary policy transmission mechanism through the asset price channel, this study uses the variables of consumption, inflation, interest rates, economic growth and the composite stock price index. Meanwhile, to examine the role of sukuk in the monetary policy transmission mechanism through the exchange rate channel, this study used variables of inflation, interest rates, economic growth, foreign investment and exchange rate. Findings This study documented that sukuk has no causal relationship with inflation through asset price and exchange rate channels. Nevertheless, sukuk has a bidirectional causal relationship with economic growth through asset price and exchange rate channels. Sukuk is also documented to have a causal relationship with monetary policy variables of interest rate and stock prices through asset price and exchange rate channels. Finally, a unidirectional causality is recorded running from the exchange rate to sukuk in the exchange rate channel. Research limitations/implications The finding of independence of the sukuk market from interest rates provides evidence that the trading of the sukuk in Indonesia has been in harmony with the Islamic tenets. Practical implications The relevant Indonesian authorities need to enhance both domestic and global sukuk markets as part of efforts to promote the sustainability of Islamic capital market development in Indonesia. Originality/value To the best of the authors’ knowledge, this study is among the first attempts to empirically investigate the role of sukuk in monetary policy transmission through asset price and exchange rate channels in the context of the Indonesian economy.

Natural disasters and monetary policy: evidence from an augmented Taylor rule

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nicholas Apergis ◽  
James E. Payne
Keyword(s):  
Developing Countries ◽  
Monetary Policy ◽  
Interest Rate ◽  
Natural Disasters ◽  
Natural Disaster ◽  
Taylor Rule ◽  
Nominal Interest Rate ◽  
Policy Response ◽  
Content Type ◽  
Short Run

Purpose The purpose of this paper is to examine the short-run monetary policy response to five different types of natural disasters (geophysical, meteorological, hydrological, climatological and biological) with respect to developed and developing countries, respectively. Design/methodology/approach An augmented Taylor rule monetary policy model is estimated using systems generalized method of moments panel estimation over the period 2000–2018 for a panel of 40 developed and 77 developing countries, respectively. Findings In the case of developed countries, the greatest nominal interest rate response originates from geophysical, meteorological, hydrological and climatological disasters, whereas for developing countries the nominal interest rate response is the greatest for geophysical and meteorological disasters. For both developed and developing countries, the results suggest the monetary authorities will pursue expansionary monetary policies in the short-run to lower nominal interest rates; however, the magnitude of the monetary response varies across the type of natural disaster. Originality/value First, unlike previous studies, which focused on a specific type of natural disaster, this study examines whether the short-run monetary policy response differs across the type of natural disaster. Second, in relation to previous studies, the analysis encompasses a much larger panel data set to include 117 countries differentiated between developed and developing countries.

Stock prices, exchange rate and interest rate: evidence beyond symmetry

2017 ◽  
Vol 9 (1) ◽  
pp. 2-19 ◽  
Author(s):  
Taufeeq Ajaz ◽  
Md Zulquar Nain ◽  
Bandi Kamaiah ◽  
Naresh Kumar Sharma
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Stock Prices ◽  
Asset Price ◽  
Asymmetric Reaction ◽  
Monetary Policies ◽  
Content Type ◽  
Financial Variables ◽  
Distributed Lag ◽  
Indian Context

Purpose This paper aims to examine the dynamic interactions between monetary and financial variables in the Indian context. Design/methodology/approach In this paper, the authors have applied a recently developed asymmetric autoregressive distributed lag (ARDL) model by Shin et al. (2014), for detecting nonlinearities focusing on the long-run and short-run asymmetries among economic variables. Findings The results point toward the presence of asymmetric reaction of stock prices to changes in interest rate and exchange rate in full sample, as well as in pre-crisis. However, no asymmetry was found in the post-crisis period. The results further suggest that tight monetary policies appear to retard the stock prices, more than easy monetary policies that stimulate them. Practical implications The findings of the study can be helpful in understanding the policy transmission mechanism through asset price channel. Originality/value To the best of the authors’ knowledge, this is the first study that examines the interactions between monetary and financial variables in the Indian context in an asymmetric framework. The findings of this study are quite interesting and are different from several existing studies in the literature.

scholarly journals Impacts of the monetary policy on the exchange rate: case study of Vietnam

2019 ◽  
Vol 26 (2) ◽  
pp. 220-237
Author(s):  
Van Anh Pham
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Real Effective Exchange Rate ◽  
Content Type ◽  
Effective Exchange ◽  
Quantitative Results ◽  
The Exchange Rate ◽  
The Interest Rate ◽  
Effective Exchange Rate

Purpose The purpose of this paper is to evaluate and analyze impacts of the monetary policy (MP) – money aggregate and interest rate – on the exchange rate in Vietnam. Design/methodology/approach The study uses data over the period of 2008–2018 and applies the vector autoregression model, namely recursive restriction and sign restriction approaches. Findings The main empirical findings are as follows: a contraction of the money aggregate significantly leads to the real effective exchange rate (REER) depreciating and then appreciating; a tightening of the interest rate immediately causes the REER appreciating and then depreciating; and both the money aggregate and the interest rate strongly determine fluctuations of the REER. Originality/value The quantitative results imply that the MP affects the REER considerably.

Asymmetric impact of exchange rate changes on stock returns: evidence of two de facto regimes

2019 ◽  
Vol 19 (2) ◽  
pp. 147-173
Author(s):  
Walid M.A. Ahmed
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Stock Market ◽  
Stock Returns ◽  
Stock Prices ◽  
Spillover Effects ◽  
Content Type ◽  
Currency Depreciation ◽  
Long Run ◽  
Exchange Rate Changes

Purpose This study focuses on Egypt’s recent experience with exchange rate policies, examining the existence of spillover effects of exchange rate variations on stock prices across two different de facto regimes and whether these effects, if any, are asymmetric. Design/methodology/approach The empirical analysis is carried out using a nonlinear autoregressive distributed lag modeling framework, which permits testing for the presence of short- and long-run asymmetries. Relevant local and global factors are also included in the analysis as control variables. The authors divide the entire sample into a soft peg period and a free float one. Findings Over the soft peg regime period, both positive and negative changes in EGP/USD exchange rates seem to have a significant impact on stock returns, whether in the short or long run. Short-term asymmetric effects vanish in the free float period, while long-term asymmetries continue to exist. By and large, the authors find that currency depreciation tends to exercise a stronger influence on stock returns than does currency appreciation. Practical implications The results offer important insights for investors, regulators and policymakers. With the domestic currency depreciation having a negative impact on stock prices, investors should contemplate implementing appropriate currency hedging strategies to abate depreciation risks and, hence, preserve their expected rate of return on the Egyptian pound-denominated investments. In the current post-flotation era, the government could pursue a flexible inflation targeting monetary policy framework, with a view to both lowering the soaring inflation toward an announced target rate and stabilizing economic growth. The Central Bank of Egypt (CBE) could adopt indirect monetary policy instruments to secure tightened liquidity conditions. Besides, the CBE could raise policy rates to incentivize people to keep their money in local currency-denominated instruments, instead of dollarizing their savings, thereby relieving banks of foreign currency demand pressures. Nevertheless, while being beneficial to the country’s real economy on several aspects, such contractionary monetary measures may temporarily impinge on stock market performance. Accordingly, policymakers should consider precautionary measures that reduce the potential for price distortions and unnecessary volatility in the stock market. Originality/value To the best of the authors’ knowledge, the current study represents the first attempt to explore the potential impact of exchange rate changes under different regimes on Egypt’s stock market, thus contributing to the relevant research in this area.

scholarly journals Evaluating the Factors Affecting QoE of 360-Degree Videos and Cybersickness Levels Predictions in Virtual Reality

Electronics ◽  
2020 ◽  
Vol 9 (9) ◽  
pp. 1530
Author(s):  
Muhammad Shahid Anwar ◽  
Jing Wang ◽  
Sadique Ahmad ◽  
Asad Ullah ◽  
Wahab Khan ◽  
...  
Keyword(s):  
Virtual Reality ◽  
Prediction Models ◽  
Safety Concern ◽  
Prediction Method ◽  
Perceptual Quality ◽  
Camera Motion ◽  
End User ◽  
Content Type ◽  
Factors Affecting ◽  
Subjective Experiment

360-degree Virtual Reality (VR) videos have already taken up viewers’ attention by storm. Despite the immense attractiveness and hype, VR conveys a loathsome side effect called “cybersickness” that often creates significant discomfort to the viewers. It is of great importance to evaluate the factors that induce cybersickness symptoms and its deterioration on the end user’s Quality-of-Experience (QoE) when visualizing 360-degree videos in VR. This manuscript’s intent is to subjectively investigate factors of high priority that affect a user’s QoE in terms of perceptual quality, presence, and cybersickness. The content type (fast, medium, and slow), the effect of camera motion (fixed, horizontal, and vertical), and the number of moving targets (none, single, and multiple) in a video can be the factors that may affect the QoE. The significant effect of such factors on end-user QoE under various stalling events (none, single, and multiple) is evaluated in a subjective experiment. The results from subjective experiments show a notable impact of these factors on end-user QoE. Finally, to label the viewing safety concern in VR, we propose a neural network-based QoE prediction method that can predict the degree of cybersickness influenced by 360-degree videos under various stalling events in VR. The performance accuracy of the proposed method is then compared against well-known Machine Learning (ML) algorithms and existing QoE prediction models. The proposed method achieved a 90% prediction accuracy rate and performed well against existing models and other ML methods.

Central bank action will drive global equity markets

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Equity Markets ◽  
Economic Data ◽  
Equity Prices ◽  
Monetary Policies ◽  
Content Type ◽  
Market Sentiment ◽  
The Us ◽  
Us Monetary Policy

Significance This volatility is driven by expectations of further monetary stimulus in response to a slowing economy. Despite persistent concerns about the fallout from the anticipated tightening in US monetary policy and many country-specific risks, such as the standoff between Greece and its creditors, equity market sentiment remains supported by accommodative monetary policies worldwide and expectations of the US monetary policy tightening being gradual. Impacts Market volatility could increase further, as better-than-expected economic data in the euro-area vies with weaker-than-anticipated US data. Decoupling of surging equity prices and weak economic fundamentals threatens the rally's sustainability, increasing scope for volatility. This decoupling is most pronounced in China, where weak economic data prompt buying of equities in anticipation of stimulus measures. The greatest risk in equity markets is uncertainty surrounding US interest rates and their impact on emerging markets.

scholarly journals Water Quality Prediction Method Based on Multi-Source Transfer Learning for Water Environmental IoT System

Sensors ◽  
2021 ◽  
Vol 21 (21) ◽  
pp. 7271
Author(s):  
Jian Zhou ◽  
Jian Wang ◽  
Yang Chen ◽  
Xin Li ◽  
Yong Xie
Keyword(s):  
Water Quality ◽  
Transfer Learning ◽  
Prediction Accuracy ◽  
Prediction Models ◽  
Prediction Method ◽  
Water Area ◽  
Quality Information ◽  
Quality Prediction ◽  
Monitoring Point ◽  
Water Quality Prediction

Water environmental Internet of Things (IoT) system, which is composed of multiple monitoring points equipped with various water quality IoT devices, provides the possibility for accurate water quality prediction. In the same water area, water flows and exchanges between multiple monitoring points, resulting in an adjacency effect in the water quality information. However, traditional water quality prediction methods only use the water quality information of one monitoring point, ignoring the information of nearby monitoring points. In this paper, we propose a water quality prediction method based on multi-source transfer learning for a water environmental IoT system, in order to effectively use the water quality information of nearby monitoring points to improve the prediction accuracy. First, a water quality prediction framework based on multi-source transfer learning is constructed. Specifically, the common features in water quality samples of multiple nearby monitoring points and target monitoring points are extracted and then aligned. According to the aligned features of water quality samples, the water quality prediction models based on an echo state network at multiple nearby monitoring points are established with distributed computing, and then the prediction results of distributed water quality prediction models are integrated. Second, the prediction parameters of multi-source transfer learning are optimized. Specifically, the back propagates population deviation based on multiple iterations, reducing the feature alignment bias and the model alignment bias to improve the prediction accuracy. Finally, the proposed method is applied in the actual water quality dataset of Hong Kong. The experimental results demonstrate that the proposed method can make full use of the water quality information of multiple nearby monitoring points to train several water quality prediction models and reduce the prediction bias.

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