How stable are monetary policy rules: estimating the time-varying coefficients in monetary policy reaction function for the US

2005 ◽  
Vol 49 (2) ◽  
pp. 575-590 ◽  
Author(s):  
P.A.V.B. Swamy ◽  
George S. Tavlas ◽  
I-Lok Chang
Keyword(s):  
Monetary Policy ◽  
Time Varying ◽  
Reaction Function ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Varying Coefficients ◽  
The Us ◽  
Monetary Policy Reaction Function ◽  
Time Varying Coefficients ◽  
Policy Reaction Function

Endogeneity of Monetary Policy Reaction Fun~tion: An Experience from Pakistan's Economy

1991 ◽  
Vol 30 (4II) ◽  
pp. 931-941
Author(s):  
M. Aynul Hasan ◽  
Qazi Masood Ahmed
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Money Supply ◽  
Relative Effectiveness ◽  
Reaction Function ◽  
Standard Result ◽  
Policy Variable ◽  
Target Values ◽  
Monetary Policy Reaction Function ◽  
Policy Reaction Function

Monetary policy, in general, refers to those steps taken by the Central Bank to achieve such broader objectives of the economy as growth, employment, external balance and price stability through changes in the money supply, interest rates and credit policies. The money supply thus created by the Central Bank should be in response to the changes in key macroeconomic target variables such as GNP, balance of payments, inflation, internal debt and unemployment. Indeed, a properly estimated monetary policy reaction function can provide useful information regarding such matters as to whether the Central Bank, in fact, has been systematically accommodating to the changes in the target variables. The reaction function can also provide insight into the question as to what should be the relevant indicators of the monetary policy. In addition, as argued by Havrilesky (1967), it may also play a crucial role in the formulation of long-term monetary policy strategy. The other important consideration in the development of a monetary policy reaction function pertains to the endogeneity of the monetary policy. As pointed out by Goldfeld and Blinder (1972), if a policy variable responds to the lagged (or expected) target values, then considering such a policy variable as exogenous would not only introduce the problem of misspecification but will also produce serious biases in the parameters estimated from those models. In particular, if the monetary policy variable happens to be strongly influenced by target variables, then the standard result of the relative effectiveness of the monetary policy vis-a-vis fiscal policy can be questionable on the grounds of reverse causation problem.

FINANCIAL STABILITY AND MONETARY POLICY REACTION FUNCTION FOR SOUTH ASIAN COUNTRIES: AN ECONOMETRIC APPROACH

2019 ◽  
pp. 1-30
Author(s):  
SAMIA NASREEN ◽  
SOFIA ANWAR
Keyword(s):  
Monetary Policy ◽  
South Asian ◽  
Financial Stability ◽  
Central Banks ◽  
Series Data ◽  
Reaction Function ◽  
Asian Countries ◽  
Policy Objective ◽  
Monetary Policy Reaction Function ◽  
Policy Reaction Function

This study empirically investigates a monetary policy reaction function for South Asian economies by incorporating financial stability as an additional policy objective in the central bank’s loss function. Empirical results are estimated by applying auto-regressive distributed lag (ARDL) approach to cointegration and vector autoregressive (VAR) approach using time-series data of five South Asian countries, namely, Pakistan, India, Bangladesh, Nepal and Sri Lanka. Estimated results indicate that monetary policy significantly reacts to the level of financial stability in all countries. The result further suggests that central banks would tighten monetary policy if output gap widens and exchange rate depreciate. In addition, central banks of Pakistan and India do not respond significantly to inflation gap.

scholarly journals Monetary Policy Reaction Function and Sterilization of Capital Inflows: An Analysis of Asian Countries

2011 ◽  
Vol 7 (9) ◽  
Author(s):  
Muhammad Saim Hashmi ◽  
Changsheng Xu ◽  
Muhammad Mahroof Khan ◽  
Mohsin Bashir ◽  
Faheem Ghazanfar
Keyword(s):  
Monetary Policy ◽  
Capital Inflows ◽  
Reaction Function ◽  
Asian Countries ◽  
Monetary Policy Reaction Function ◽  
Policy Reaction Function

scholarly journals Welfare-Based Monetary Policy Rules in an Estimated DSGE Model of the Us Economy

2006 ◽  
Author(s):  
Michel Juillard ◽  
Philippe Karam ◽  
Douglas Laxton ◽  
Paolo A. Pesenti
Keyword(s):  
Monetary Policy ◽  
Dsge Model ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Us Economy ◽  
The Us

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.

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