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Monetary Policy Rule and its Performance under Inflation Targeting in Thailand

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  • Hiroyuki Taguchi
  • Mesa Wanasilp

Abstract

This article reviews the Thailand monetary policy rule and its performance under the adoption of inflation targeting regime since 2000. The study estimates the policy reaction function to see if the inflation targeting has been linked with an inflation-responsive monetary policy rule, and investigates whether the monetary policy rule would actually have its transmission effect on inflation, through tracing the impulse responses of inflation rate to monetary policy shocks. The main findings are as follows. The estimation outcomes of the policy reaction function show that the Thailand monetary policy rule is characterized as an inflation- and exchange-rate- responsive rule with forward-looking manner, which is countercyclical against inflation in the long run, but is accompanied with slow adjustment toward a target policy rate. The impulse response analyses imply that the Thailand monetary policy has only a marginal transmission effect on inflation probably due to the slow adjustment of policy rate.

Suggested Citation

  • Hiroyuki Taguchi & Mesa Wanasilp, 2018. "Monetary Policy Rule and its Performance under Inflation Targeting in Thailand," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 5(1), pages 19-28.
    • Handle: RePEc:aoj:ajeaer:v:5:y:2018:i:1:p:19-28:id:242
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    Citations

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    Cited by:

    1. Ruch,Franz Ulrich, 2021. "Neutral Real Interest Rates in Inflation Targeting Emerging and Developing Economies," Policy Research Working Paper Series 9711, The World Bank.
    2. Mesa Wanasilp, 2021. "Monetary Policy Rules in Emerging ASEAN Economies: Adaptability of Taylor Principle," International Journal of Asian Business and Information Management (IJABIM), IGI Global, vol. 12(3), pages 255-274, July.
    3. Shobande Olatunji Abdul, 2018. "Monetary Policy Transmission Mechanism in Nigeria: Does Interest Spread Complicate Inflationary Targeting ?," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 47-52, December.
    4. Pongsak Luangaram & Nipit Wongpunya, 2022. "Exploring the Role of Exchange Rate in Inflation Targeting: Evidence from Thailand," PIER Discussion Papers 179, Puey Ungphakorn Institute for Economic Research.
    5. Taguchi, Hiroyuki, 2018. "Monetary policy rule under inflation targeting: the case of Mongolia," MPRA Paper 86132, University Library of Munich, Germany.
    6. Moses K. Tule & Oloruntoba S. Ogundele & Martins O. Apinran, 2018. "Efficacy of Monetary Policy Instruments on Economic Growth: Evidence from Nigeria," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(10), pages 1239-1256, October.

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