scholarly journals Monetary Policy Rules in Emerging ASEAN Economies

2021 ◽  
Vol 12 (3) ◽  
pp. 255-274
Author(s):  
Mesa Wanasilp
Keyword(s):  
Monetary Policy ◽  
Method Of Moments ◽  
Inflation Targeting ◽  
Generalized Method Of Moments ◽  
The Philippines ◽  
Policy Implications ◽  
Output Gap ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
The Difference

This paper examines the monetary policy rules for five emerging ASEAN economies—Indonesia, the Philippines, and Thailand as the adopters of inflation targeting (IT) and Malaysia and Vietnam as the non-IT adopters. For the methodology, this study applies a generalized method of moments that provides a consistent and efficient estimator for the estimation that contains endogenously determined variables. The questions are whether the rules of the IT adopters have fulfilled the Taylor principle and what has been the difference in the rules between the IT adopters and the non-IT adopters. The main findings are as follows: Regarding the IT adopters, their rules are characterized by inflation-responsive rules fulfilling the Taylor principle. As for the non-IT adopters, Malaysia follows solely an output-gap responsive rule, and Vietnam exhibits the mixed rules. The policy implications are that for the IT adopters there might be room to make their policy-rate responses more elastic to inflation, and that for the non-IT adopters, there would be a need to adopt an explicit IT framework.

scholarly journals Monetary Policy Rules in Emerging ASEAN Economies

2021 ◽  
Vol 12 (3) ◽  
pp. 0-0
Keyword(s):  
Monetary Policy ◽  
Method Of Moments ◽  
Inflation Targeting ◽  
Generalized Method Of Moments ◽  
The Philippines ◽  
Policy Implications ◽  
Output Gap ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
The Difference

This paper examines the monetary policy rules for five emerging ASEAN economies: Indonesia, the Philippines, and Thailand as the adopters of inflation targeting (IT), and Malaysia and Vietnam as the non-IT adopters. For the methodology, this study applies a generalized method of moments that provides a consistent and efficient estimator, for the estimation that contains endogenously determined variables. The questions are: whether the rules of the IT adopters have fulfilled the Taylor principle, and what has been the difference in the rules between the IT adopters and the non-IT adopters. The main findings are as follows. Regarding the IT adopters, their rules are characterized by inflation-responsive rules fulfilling the Taylor principle. As for the non-IT adopters, Malaysia follows solely an output-gap responsive rule; and Vietnam exhibits the mixed rules. The policy implications are that for the IT adopters there might be room to make their policy-rate responses more elastic to inflation; and that for the non-IT adopters there would be a need to adopt an explicit IT framework.

On the fundamental Deficiencies of Current monetary Policy

2014 ◽  
pp. 80-100 ◽  
Author(s):  
A. Apokin ◽  
D. Belousov ◽  
I. Goloshchapova ◽  
I. Ipatova ◽  
O. Solntsev
Keyword(s):  
Monetary Policy ◽  
Financial System ◽  
Output Gap ◽  
Rule Based ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Economic Agents ◽  
Policy Review ◽  
Potential Gdp

We outline three main shortcomings of current monetary policy in Russia for 2014. First, monetary policy is too strict: we estimate output gap over -3% potential GDP, and rule-based key rate is 6,25%. Second, Bank of Russia in 2014 clearly ignores its second goal of promoting stable and developing financial system. Third, today economic agents lack for clear expectations of monetary policy rules, and it is Bank of Russia’s duty to help forming these expectations - both through public commitments and independent monetary policy review.

scholarly journals Forward-Looking and Backward-Looking Taylor Rules: Evidence from Pakistan

2013 ◽  
Vol 18 (2) ◽  
pp. 121-145
Author(s):  
Nadia Tahir
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Method Of Moments ◽  
Generalized Method Of Moments ◽  
The State ◽  
Output Gap ◽  
Taylor Rules ◽  
Quarterly Data ◽  
Interest Rate Rule ◽  
Forward Looking

This study uses the forward-looking rule and backward-looking Taylor rule to investigate the conduct of monetary policy in Pakistan during 1971–2011. We compare the pre- and post-reform periods, and find that the estimates obtained using the generalized method of moments indicate that no interest rate rule was being followed. This explains the inability of monetary policy to control inflation and minimize the output gap. Although monetary policy was not very active in the pre- and post-reform periods, the post-reform quarterly data show some interest rate inertia and smoothing. Monetary policy was less accommodating of the cyclical nature of the output gap. We conclude that the behavior of the State Bank of Pakistan was not very different under forward- or backward-looking rules.

scholarly journals The Dependence of China’s Monetary Policy Rules on Interest Rate Regimes: Empirical Analysis Based on a Pseudo Output Gap

2019 ◽  
Vol 11 (9) ◽  
pp. 2557
Author(s):  
Xiaoyu Zhang ◽  
Fanghui Pan
Keyword(s):  
Growth Rate ◽  
Monetary Policy ◽  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Policy Preferences ◽  
Output Gap ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Nominal Interest Rates

Although a large number of scholars have studied the policy preferences and monetary policy rules of China’s central bank, most have found no evidence that China’s central bank has adjusted the nominal interest rates against the output gap. By constructing the pseudo output gap defined by the deviation of the real output growth rate and the target growth rate, this paper finds that China’s central bank prefers to adjust the nominal interest rates against the pseudo output gap. The monetary policy preferences and rules of China’s central bank in different interest rate regimes are investigated based on the threshold Taylor rule model. It is found that, in the high-interest-rate regime, the central bank adjusts the nominal interest against the inflation gap and the pseudo output gap, while in the low-interest-rate regime, there is no evidence that the central bank adjusts the nominal interest rates against the pseudo output gap. The lower bound of interest rate reduction and the weakening of interest rate policy effects caused by the liquidity trap of the interest rate are the possible reasons for China’s central bank not to adjust the nominal interest rates against the pseudo output gap.

scholarly journals The Science of Monetary Policy: A New Keynesian Perspective

1999 ◽  
Vol 37 (4) ◽  
pp. 1661-1707 ◽  
Author(s):  
Richard Clarida ◽  
Jordi Galí ◽  
Mark Gertler
Keyword(s):  
Monetary Policy ◽  
Real World ◽  
Imperfect Information ◽  
Inflation Targeting ◽  
Recent Literature ◽  
Policy Design ◽  
New Keynesian ◽  
Credible Commitment ◽  
Policy Rules ◽  
Monetary Policy Rules

The paper reviews the recent literature on monetary policy rules. We exposit the monetary policy design problem within a simple baseline theoretical framework. We then consider the implications of adding various real world complications. Among other things, we show that the optimal policy implicitly incorporates inflation targeting. We also characterize the gains from making a credible commitment to fight inflation. In contrast to conventional wisdom, we show that gains from commitment may emerge even if the central bank is not trying to inadvisedly push output above its natural level. We also consider the implications of frictions such as imperfect information.

scholarly journals The Design and Conduct of Monetary Policy: Lessons for Pakistan (The Quaid-i-Azam Lecture)

2009 ◽  
Vol 48 (4I) ◽  
pp. 337-356 ◽  
Author(s):  
Mohsin S. Khan
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Jel Classification ◽  
Monetary Policies ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Global Capital ◽  
Mobile Capital ◽  
Recent Developments ◽  
Rules Versus Discretion

Movements in global capital during the late 1990s and the greater emphasis on price stability led many countries to abandon fixed exchange rate regimes and to design institutions and monetary policies to achieve credibility in the goal of lowering inflation. Such recent developments have brought to the forefront the idea that freely mobile capital, independent monetary policy, and fixed exchange rates form an “impossible trinity”. Inflation-targeting regimes being adopted by many countries provide a way of resolving this dilemma, and it is suggested that such a regime be implemented in Pakistan as well. JEL classification: E42, E52 Keywords: Monetary Policy, Rules versus Discretion, Inflation Targeting

scholarly journals Welfare Implications of Alternative Monetary Policy Rules: A New Keynesian DSGE Model for Turkey

2017 ◽  
Vol 17 (4) ◽  
pp. 363-379
Author(s):  
Özge Filiz Yağcıbaşı ◽  
Mustafa Ozan Yıldırım
Keyword(s):  
Monetary Policy ◽  
Loss Function ◽  
Inflation Targeting ◽  
New Keynesian ◽  
Demand Shock ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Output Fluctuations ◽  
Turkish Economy ◽  
Technology Shock

Abstract In recent years, there has been extensive research on the conduct of monetary policy in small open economies that are subject to inflation and output fluctuations. Policymakers should decide whether to implement strict inflation targeting or to respond to the changes in output fluctuations while conducting monetary policy rule. This study aims to examine the response of alternative monetary policy rules to Turkish economy by means of a DSGE model that is subject to demand and technology shocks. The New Keynesian model we used is borrowed from Gali (2015) and calibrated for the Turkish economy. Welfare effects of alternative Taylor rules are evaluated under different specifications of central bank loss function. One of the main findings of this paper is that in the case of a technology shock, strict inflation targeting rules provide the minimum welfare loss under all loss function configurations. On the contrary, the losses are weakened if the monetary authority responds to output fluctuations in the presence of a demand shock. Finally, there exists a trade-off between the volatility of output and inflation in case of a technology shock, while the volatility of both variables moves in the same direction in response to a demand shock.

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