Monetary policy rules in emerging countries: is there an augmented nonlinear Taylor rule?

Caporale, Guglielmo Maria, Helmi, Mohamad Husam, Catik, Abdurrahman Nazif, Menla Ali, Faek and Akdeniz, Coskun (2018) Monetary policy rules in emerging countries: is there an augmented nonlinear Taylor rule? Economic Modelling. ISSN 0264-9993

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Abstract

This paper examines the Taylor rule in five emerging economies, namely Indonesia, Israel, South Korea, Thailand, and Turkey. In particular, it investigates whether monetary policy in these countries can be more accurately described by (i) an augmented rule including the exchange rate, as well as (ii) a nonlinear threshold specification (estimated using GMM), instead of a baseline linear rule. The results suggest that the reaction of monetary authorities to deviations from target of either the inflation or the output gap differs in terms of the size and/or statistical significance of the coefficients in the high and low inflation regimes in all countries. In particular, the exchange rate has an impact in the former but not in the latter regime. Overall, an augmented nonlinear Taylor rule appears to capture more accurately the behaviour of monetary authorities in these countries.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Business and Management
Subjects: H Social Sciences
Depositing User: Tahir Beydola
Date Deposited: 14 Feb 2018 12:23
Last Modified: 21 May 2018 15:16
URI: http://sro.sussex.ac.uk/id/eprint/73587

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