Monetary policy rules in emerging market economies: issues and evidence
AbstractThe paper reviews the recent conduct of monetary policy and central banks' interest rate setting behaviour in emerging market economies. Using a standard open economy reaction function, we test whether central banks in emerging economies react to changes in inflation, output gaps and the exchange rate in a consistent and predictable manner. In most emerging economies the interest rate responds strongly to the exchange rate; in some, the response is higher than that to changes in the inflation rate or the output gap. The result is robust to alternative specification and estimation methods. This highlights the importance of the exchange rate as a source of shock and supports the "fear of floating" hypothesis. Evidence also suggests that in some countries the central bank's response to a negative inflation shock might be weaker than to a positive shock.
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.
Bibliographic InfoPaper provided by Bank for International Settlements in its series BIS Working Papers with number 149.
Length: 39 pages
Date of creation: Mar 2004
Date of revision:
monetary policy rules; emerging market economies;
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.:
- M S Mohanty, 2002. "Improving liquidity in government bond markets: what can be done?," BIS Papers chapters, in: Bank for International Settlements (ed.), The development of bond markets in emerging economies, volume 11, pages 49-80 Bank for International Settlements.
- Reinhart, Carmen & Calvo, Guillermo, 2002.
"Fear of floating,"
14000, University Library of Munich, Germany.
- M S Mohanty & Michela Scatigna, 2005. "Has globalisation reduced monetary policy independence?," BIS Papers chapters, in: Bank for International Settlements (ed.), Globalisation and monetary policy in emerging markets, volume 23, pages 17-58 Bank for International Settlements.
- Dolado, Juan J. & Maria-Dolores, Ramon & Naveira, Manuel, 2005. "Are monetary-policy reaction functions asymmetric?: The role of nonlinearity in the Phillips curve," European Economic Review, Elsevier, vol. 49(2), pages 485-503, February.
- Surico, Paolo, 2003. "US Monetary Policy Rules: the Case for Asymmetric Preferences," Royal Economic Society Annual Conference 2003 199, Royal Economic Society.
- Alberto Alesina & Alexander Wagner, 2003.
"Choosing (And Reneging On) Exchange Rate Regimes,"
Harvard Institute of Economic Research Working Papers
2008, Harvard - Institute of Economic Research.
- Corrinne Ho & Robert N. McCauley, 2003. "Living with flexible exchange rates: issues and recent experience in inflation targeting emerging market economies," BIS Working Papers 130, Bank for International Settlements.
- Philip Lowe & Luci Ellis, 1997. "The Smoothing of Official Interest Rates," RBA Annual Conference Volume, in: Philip Lowe (ed.), Monetary Policy and Inflation Targeting Reserve Bank of Australia.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Timo Laurmaa).
If references are entirely missing, you can add them using this form.