Evaluating the Role of the Exchange Rate in Monetary Policy Reaction Function of Advanced and Emerging Market Economies

Abstract The subject of this paper is the evaluation monetary policy reaction function on panel data 37 world economies, both advanced and emerging markets, during period 1995Q1 – 2018Q3. aims to evaluate role importance exchange rate in depending level economic development. For purpose, a relevant set unbalanced was formed with balanced relationship between developed market economies. methodology empirical research based econometric assessment within which central bank adjusts its key dynamics inflation, output gap fluctuations real effective rate. results confirm hypothesis that represents statistically significant variable only In contrast, adequate specification economies’ rule includes standard macroeconomic fundamentals inflation gap.