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Monetary policy rule under inflation targeting: the case of Mongolia

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  • Taguchi, Hiroyuki

Abstract

This article aims to review the monetary policy rule under inflation targeting framework focusing on Mongolia. The empirical analysis estimates the policy reaction function to see if the inflation targeting has been linked with a monetary policy rule emphasizing on inflation stabilization since its adoption in 2007. The study contributes to the literature by examining the linkage between Mongolian monetary policy rule and inflation targeting directly and thoroughly for the first time and also by taking into account a recent progress in the inflation targeting framework toward forward-looking mode. The main findings were: the Mongolian current monetary policy rule under inflation targeting is characterized as inflation-responsive rule with forward-looking manner (one quarter ahead); the inflation responsiveness is, however, weak enough to be pro-cyclical to inflation pressure; and the rule is also responsive to exchange rate due to the “fear of floating”, which weakens the policy reaction to inflation and output gap.

Suggested Citation

  • Taguchi, Hiroyuki, 2018. "Monetary policy rule under inflation targeting: the case of Mongolia," MPRA Paper 86132, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:86132
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    References listed on IDEAS

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    Cited by:

    1. Chuluunbayar, Delgerjargal, 2019. "Output Composition of Monetary Policy Transmission in Mongolia," MPRA Paper 98111, University Library of Munich, Germany.
    2. Taguchi, Hiroyuki, 2018. "Stock market and macroeconomic policies: The case of Mongolia," MPRA Paper 90686, University Library of Munich, Germany.
    3. Hiroyuki Taguchi & Ganbayar Gunbileg, 2020. "Monetary Policy Rule and Taylor Principle in Mongolia: GMM and DSGE Approaches," IJFS, MDPI, vol. 8(4), pages 1-16, November.
    4. Taguchi, Hiroyuki, 2019. "The bond market development in Mongolia among Asian countries," MPRA Paper 95123, University Library of Munich, Germany.
    5. Hiroyuki Taguchi & Ganbold Bolormaa, 2019. "The Development Stage of Bond Market in Mongolia among Asian Countries," Applied Economics and Finance, Redfame publishing, vol. 6(6), pages 54-68, November.
    6. Taguchi, Hiroyuki, 2020. "Monetary Policy Rule and Taylor Principle by GMM and DSGE Approaches: The Case of Mongolia," MPRA Paper 104182, University Library of Munich, Germany.
    7. Taguchi, Hiroyuki, 2019. "Inflation targeting and the pass-through effect: The case of Mongolia," MPRA Paper 92988, University Library of Munich, Germany.
    8. Hiroyuki Taguchi & Namjil Enkhbaatar, 2019. "Stock Market and Macroeconomic Policies in Mongolia," Bulletin of Applied Economics, Risk Market Journals, vol. 6(1), pages 21-39.

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    More about this item

    Keywords

    Monetary policy rule; Inflation targeting; The Bank of Mongolia; Policy reaction function; and Fear of floating;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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