What Drives Monetary Policy in Post-Crisis East Asia? Interest Rate or Exchange Rate Monetary Policy Rules
AbstractThis paper estimates a simple small open macroeconomic model to analyse the effectiveness of monetary policy rules (MPRs) where either the nominal interest rate or the nominal exchange rate is the policy instrument. The aim is to ascertain which of those MPRs are best suited for a selection of inflation targeting economies of Asia. Normally, one would associate inflation targeting with interest rate rules but it is thought that, due to fear of floating, exchange rate rules may well be more effective given the openness of these economies. It is found that interest rate rules seem to better reflect the prevailing policy regime than exchange rate rules. It is also found that stronger relationships pertaining to the interest rate rules are found in the case of Korea and Thailand than for Indonesia and the Philippines. Exchange rates appear to be very influential in determining the value of the nominal interest rate but not in a policy sense.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Asian Economics.
Volume (Year): 21 (2010)
Issue (Month): 5 (October)
Contact details of provider:
Web page: http://www.elsevier.com/locate/asieco
Asia Exchange rate regime Inflation targeting Monetary policy rules;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Barry Eichengreen, 2002. "Can Emerging Markets Float? Should They Inflation Target?," Working Papers Series 36, Central Bank of Brazil, Research Department.
- Tony Cavoli & Ramkishen S. Rajan, 2006.
"Inflation Targeting Arrangements In Asia : Exploring The Role Of The Exchange Rate,"
Macroeconomics Working Papers
22564, East Asian Bureau of Economic Research.
- Tony Cavoli & Ramkishen S. Rajan, 2006. "Inflation Targeting Arrangements in Asia: Exploring the Role of the Exchange Rate," SCAPE Policy Research Working Paper Series 0603, National University of Singapore, Department of Economics, SCAPE.
- Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
- Carl E. Walsh, 2003. "Monetary Theory and Policy, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232316, December.
- Lars E. O. Svensson, 2000.
"Open-Economy Inflation Targeting,"
NBER Working Papers
6545, National Bureau of Economic Research, Inc.
- Svensson, Lars E O, 1998. "Open-Economy Inflation Targeting," CEPR Discussion Papers 1989, C.E.P.R. Discussion Papers.
- Svensson, Lars E.O., 1998. "Open-Economy Inflation Targeting," Seminar Papers 638, Stockholm University, Institute for International Economic Studies.
- Svensson, L.E.O., 1998. "Open-Economy Inflation Targeting," Papers 638, Stockholm - International Economic Studies.
- Laurence M. Ball, 1999.
"Policy Rules for Open Economies,"
in: Monetary Policy Rules, pages 127-156
National Bureau of Economic Research, Inc.
- Clarida, Richard & Galí, Jordi & Gertler, Mark, 1997.
"Monetary Policy Rules in Practice: Some International Evidence,"
CEPR Discussion Papers
1750, C.E.P.R. Discussion Papers.
- Clarida, Richard & Gali, Jordi & Gertler, Mark, 1998. "Monetary policy rules in practice Some international evidence," European Economic Review, Elsevier, vol. 42(6), pages 1033-1067, June.
- Richard Clarida & Jordi Gali & Mark Gertler, 1997. "Monetary Policy Rules in Practice: Some International Evidence," NBER Working Papers 6254, National Bureau of Economic Research, Inc.
- Clarida, Richard & Gali, Jordi & Gertler, Mark, 1997. "Monetary Policy Rules in Practice: Some International Evidence," Working Papers 97-32, C.V. Starr Center for Applied Economics, New York University.
- Eric Parrado, 2004. "Singapore's Unique Monetary Policy," IMF Working Papers 04/10, International Monetary Fund.
- Cavoli, Tony, 2008. "The exchange rate and optimal monetary policy rules in open and developing economies: Some simple analytics," Economic Modelling, Elsevier, vol. 25(5), pages 1011-1021, September.
- M. S. Mohanty & Marc Klau, 2004. "Monetary policy rules in emerging market economies: issues and evidence," BIS Working Papers 149, Bank for International Settlements.
- Tony Cavoli & Ramkishen S. Rajan, 2007. "Managing in the Middle: Characterizing Singapore's Exchange Rate Policy ," Asian Economic Journal, East Asian Economic Association, vol. 21(3), pages 321-342, 09.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.