Monetary Rule in Taiwan - An Empirical Study
Date Issued
2009
Date
2009
Author(s)
Tseng, Yu-Mei
Abstract
This paper studies the monetary rule for Taiwan. In addition to output and inflation targeting, we also consider the role of exchange rate fluctuations in theentral bank''s decision process. Our empirical results indicate that the behavior of Taiwan''s central bank is strongly influenced by the state of the economy, and is best described by a nonlinear and asymmetric specificationf the model, either McCallum''s type or Taylor''s type. We estimate the monetary rules using two types of specifications: 1) linear model with dummies representing the state of the economy, and2) Markov switching model.sing quarterly data from 1985 to 2008, we find that the central bank in Taiwan is particularly sensitive to the real performance of the economy. The central bank would devote its efforts to fight inflation only when the economy is prosperous. During recessions, the central bank would typically adopt a counter-cyclical policy, inflation is not its major concern. After controlling the state of output growth, exchange rate fluctuations do not seem to play an important role in the monetary policy.
Subjects
Monetary Policy
Monetary Rule
McCallum Rule
Taylor Rule
Markov Switching Model
Asymmetric Time Series Model
Type
thesis
File(s)![Thumbnail Image]()
Loading...
Name
ntu-98-P96323006-1.pdf
Size
23.53 KB
Format
Adobe PDF
Checksum
(MD5):b22a1f1bb28aa072352fefb00bf3c388