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Estimation of weights for the Monetary Conditions Index in Poland

  • Andrzej Toroj


    (Warsaw School of Economics, National Bank of Poland)

In this paper, we follow the econometric approach to assess relative importance of real interest rate and real exchange rate for the monetary conditions in Poland, quantified as weights for Monetary Conditions Index (MCI). We consider both single- and multiple-equation specifications proposed in the literature with an application to Poland. Although MCI is nowadays broadly considered a rather obsolete indicator in monetary policy conduct, we argue that the econometric framework used for this purpose could be a good departure point when modelling monetary adjustments in a monetary union, provided correct dynamic specification of the models.

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Paper provided by Department of Applied Econometrics, Warsaw School of Economics in its series Working Papers with number 27.

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Length: 27 pages
Date of creation: 23 Jun 2008
Date of revision:
Handle: RePEc:wse:wpaper:27
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  1. Gregory, Allan W & Veall, Michael R, 1985. "Formulating Wald Tests of Nonlinear Restrictions," Econometrica, Econometric Society, vol. 53(6), pages 1465-68, November.
  2. Mayes, David & Virén, Matti, 2001. "Financial conditions indexes," Research Discussion Papers 17/2001, Bank of Finland.
  3. Bernd Hayo & Volker Clausen, 2002. "Asymmetric Monetary Policy Effects in EMU," Macroeconomics 0203003, EconWPA.
  4. Benati, Luca, 2008. "Investigating inflation persistence across monetary regimes," Working Paper Series 0851, European Central Bank.
  5. Mayes, David G & Virén, Matti, 2000. "Asymmetry and the Problem of Aggregation in the Euro Area," Research Discussion Papers 11/2000, Bank of Finland.
  6. Frederic S. Mishkin & Klaus Schmidt-Hebbel, 2001. "One decade of inflation targeting in the world : What do we know and what do we need to know?," Working Papers Central Bank of Chile 101, Central Bank of Chile.
  7. Eika, Kari H & Ericsson, Neil R & Nymoen, Ragnar, 1996. "Hazards in Implementing a Monetary Conditions Index," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(4), pages 765-90, November.
  8. von Hagen, Jürgen & Hofmann, Boris, 2003. "Macroeconomic implications of low inflation in the euro area," ZEI Working Papers B 29-2003, ZEI - Center for European Integration Studies, University of Bonn.
  9. Gerlach, Stefan & Smets, Frank, 2000. "MCIs and monetary policy," European Economic Review, Elsevier, vol. 44(9), pages 1677-1700, October.
  10. Grande, G., 1997. "Properties of the Monetary Conditions Index," Papers 324, Banca Italia - Servizio di Studi.
  11. Charles Freedman, 1995. "The role of monetary conditions and the monetary conditions index in the conduct of policy [speech]," Bank of Canada Review, Bank of Canada, vol. 1995(Autumn), pages 53-59.
  12. Jan Gottschalk, 2001. "Monetary Conditions in the Euro Area: Useful Indicators of Aggregate Demand Conditions?," Kiel Working Papers 1037, Kiel Institute for the World Economy.
  13. Siklos, Pierre L, 2000. "Is the MCI a Useful Signal of Monetary Policy Conditions? An Empirical Investigation," International Finance, Wiley Blackwell, vol. 3(3), pages 413-37, November.
  14. Tor Jacobson & Per Jansson & Anders Vredin & Anders Warne, 2001. "Monetary policy analysis and inflation targeting in a small open economy: a VAR approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(4), pages 487-520.
  15. Andreas Fischer & Adrian Orr, 1994. "The Determinants and Properties of Monetary Conditions: Direct Survey Evidence from New Zealand," OECD Economics Department Working Papers 150, OECD Publishing.
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