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Understanding monetary policy in Central European countries using Taylor-type rules: the case of the Visegrad four

Author

Listed:
  • Juan Paez-Farrell

    () (Cardiff University)

Abstract

This paper assesses to what extent simple Taylor-type monetary policy rules provide a good description of interest rate setting behaviour in the Visegrad four countries. Six different models are analysed, chosen on the basis of possessing desirable theoretical features. The paper finds that exchange rates feature prominently in three of the four countries' policy rules and that the results are sensitive to the measure of inflation used.

Suggested Citation

  • Juan Paez-Farrell, 2007. "Understanding monetary policy in Central European countries using Taylor-type rules: the case of the Visegrad four," Economics Bulletin, AccessEcon, vol. 5(3), pages 1-11.
  • Handle: RePEc:ebl:ecbull:eb-06e50023
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    File URL: http://www.accessecon.com/pubs/EB/2007/Volume5/EB-06E50023A.pdf
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    References listed on IDEAS

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    1. Carl Walsh, 2003. "Speed Limit Policies: The Output Gap and Optimal Monetary Policy," American Economic Review, American Economic Association, pages 265-278.
    2. Paolo Surico, 2003. "Asymmetric Reaction Functions for the Euro Area," Oxford Review of Economic Policy, Oxford University Press, vol. 19(1), pages 44-57.
    3. Kai Leitemo & Ulf Soderstrom, 2001. "Simple monetary policy rules and exchange rate uncertainty," Proceedings, Federal Reserve Bank of San Francisco.
    4. repec:ebl:ecbull:v:5:y:2005:i:7:p:1-16 is not listed on IDEAS
    5. Leitemo, Kai & Soderstrom, Ulf, 2005. "Simple monetary policy rules and exchange rate uncertainty," Journal of International Money and Finance, Elsevier, pages 481-507.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Vašíček, Bořek, 2012. "Is monetary policy in the new EU member states asymmetric?," Economic Systems, Elsevier, vol. 36(2), pages 235-263.
    2. Hakan Yilmazkuday, 2008. "Structural Breaks in Monetary Policy Rules: Evidence from Transition Countries," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 44(6), pages 87-97, November.
    3. Caraiani, Petre, 2011. "Comparing Monetary Policy Rules in the Romanian Economy: A New Keynesian Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, pages 30-46.
    4. Nojković, Aleksandra & Petrović, Pavle, 2015. "Monetary policy rule in inflation targeting emerging European countries: A discrete choice approach," Journal of Policy Modeling, Elsevier, vol. 37(4), pages 577-595.
    5. Regős, Gábor, 2013. "Kockázattal kiegészített Taylor-szabályok becslése Magyarországra
      [Estimation of risk-augmented Taylor rules for Hungary]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(6), pages 670-702.
    6. Josef Arlt & Martin Mandel, 2014. "The Reaction Function of Three Central Banks of Visegrad Group," Prague Economic Papers, University of Economics, Prague, pages 269-289.
    7. Frömmel, Michael & Garabedian, Garo & Schobert, Franziska, 2011. "Monetary policy rules in Central and Eastern European Countries: Does the exchange rate matter?," Journal of Macroeconomics, Elsevier, pages 807-818.
    8. repec:ksa:szemle:1744 is not listed on IDEAS
    9. Iulian Vasile Popescu, 2014. "The impact of the recent global crisis on the prioritization of central banks final objectives. A structural approach in the context of Central and Eastern European states," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 7(2), pages 51-76, September.
    10. Frömmel, Michael & Garabedian, Garo & Schobert, Franziska, 2011. "Monetary policy rules in Central and Eastern European Countries: Does the exchange rate matter?," Journal of Macroeconomics, Elsevier, pages 807-818.
    11. Josef Arlt & Martin Mandel, 2012. "Je možné předpovídat repo sazbu ČNB na základě zpět hledícího měnového pravidla?
      [Is it Possible to Predict the CNB Repo Rate on the Basis of the Backward-Looking Monetary Rule?]
      ," Politická ekonomie, University of Economics, Prague, vol. 2012(4), pages 484-504.
    12. Maciej Ryczkowski, 2016. "Poland as an inflation nutter:The story of successful output stabilization," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics, vol. 34(2), pages 363-392.
    13. Jiang, Chun & Jian, Na & Liu, Tie-Ying & Su, Chi-Wei, 2016. "Purchasing power parity and real exchange rate in Central Eastern European countries," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 349-358.
    14. Taro Ikeda, 2010. "Asymmetric Preferences for Monetary Policy Rules in the Visegrad Four and the Financial Crisis," Economics Bulletin, AccessEcon, vol. 30(3), pages 2160-2188.
    15. POPESCU Iulian Vasile, 2013. "Monetary Policy Rules For European Monetary Union Acceding Countries," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 8(2), pages 108-122, August.
    16. Jaromír Kukal & Tran Van Quang, 2014. "A Monetary Policy Rule Based on Fuzzy Control in an Inflation Targeting Framework," Prague Economic Papers, University of Economics, Prague, pages 290-314.

    More about this item

    Keywords

    Monetary policy Interest rules inflation exchange rates;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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