Reaction functions of the Polish central bankers. A logit approach
Paper presents the analysis of individual reactions functions of Polish Monetary Policy Council (MPC) members in the years 2004–2005. In the period under study the Polish central bank (National Bank of Poland) used the bias in the monetary policy as an indicator of future interest rate movements and a change of bias without a change in the short-term interest rate resulted in shifts of the yield curve comparable to those which accompanied changes in the short-term interest rate. For that reason as a monetary policy instrument in the reaction functions we use a qualitative variable, which expresses the direction of change in the restrictiveness of the monetary policy proposed by the given member of the MPC (the change of bias and/or change of central bank short-term interest rate). Taking into account the qualitative nature of the dependent variable, we employ the ordered logit model, where several variants of the reaction functions are tested. The results of the research indicate that the majority of the Polish MPC members acted forward looking rather then backward looking. The classical Taylor’s backward looking reaction function has been rejected by the data for most MPC members. Moreover the substitution of the lagged inflation by the future inflation improved the quality of the all considered models. On the other hand in the forward looking reaction function with the inflation expectations formulated for 12 months ahead the variable expressing the expectations has been significant in 6 out of 7 individual functions. The research has been completed by the sensitivity analysis of the behaviour of the MPC members against changes in the current and future inflation and changes in the output gap.
|Date of creation:||22 May 2005|
|Date of revision:|
|Contact details of provider:|| Postal: 02-513 Warszawa, ul. Madalinskiego 6/8|
Phone: + (48)(22) 49 12 51
Fax: + (48)(22) 49 53 12
Web page: http://www.sgh.waw.pl/instytuty/zes
More information through EDIRC
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.:
- 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, 1998. "Monetary policy rules in practice Some international evidence," European Economic Review, Elsevier, vol. 42(6), pages 1033-1067, June.
- 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.
- 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.
- Fok, D. & Franses, Ph.H.B.F. & Cramer, J.S., 1999.
"Ordered logit analysis for selectively sampled data,"
Econometric Institute Research Papers
EI 9933/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- Fok, Dennis & Franses, Philip Hans, 2002. "Ordered logit analysis for selectively sampled data," Computational Statistics & Data Analysis, Elsevier, vol. 40(3), pages 477-497, September.
- Svensson, L.E.O., 1998.
"Inflation Targeting as a Monetary Policy Rule,"
646, Stockholm - International Economic Studies.
- Svensson, Lars E O, 1998. "Inflation Targeting as a Monetary Policy Rule," CEPR Discussion Papers 1998, C.E.P.R. Discussion Papers.
- Lars E.O. Svensson, 1998. "Inflation Targeting as a Monetary Policy Rule," NBER Working Papers 6790, National Bureau of Economic Research, Inc.
- Svensson, Lars E. O., 1998. "Inflation targeting as a monetary policy rule," CFS Working Paper Series 1998/16, Center for Financial Studies (CFS).
- Svensson, Lars E.O., 1998. "Inflation Targeting as a Monetary Policy Rule," Seminar Papers 646, Stockholm University, Institute for International Economic Studies.
- John B. Taylor, 2001. "The Role of the Exchange Rate in Monetary-Policy Rules," American Economic Review, American Economic Association, vol. 91(2), pages 263-267, May.
When requesting a correction, please mention this item's handle: RePEc:wse:wpaper:18. See general 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: (Marcin Owczarczuk)
If references are entirely missing, you can add them using this form.