Monetary Policy Rules in Emerging Market Economies: Issues and Evidence

Monetary policy rules in emerging market economies: issues and evidence

The paper reviews the recent conduct of monetary policy and central banks’ interest rate setting behaviour in emerging market economies. Using a standard open economy reaction function, we test whether central banks in emerging economies react to changes in inflation, output gaps and the exchange rate in a consistent and predictable manner. In most emerging economies the interest rate responds ...

Monetary Models and Inflation Targeting in Emerging Market Economies

Financial Frictions and Unconventional Monetary Policy in Emerging Economies∗

We analyze conventional and unconventional monetary policies in a dynamic small open-economy model with financial frictions. In the model, financial intermediaries or banks borrow from the world market and lend to domestic households. Banks can borrow abroad up to a multiple of their equity; in turn, there is a limit to how much bank equity households can hold. An economy-wide credit constraint...

Comparing monetary policy rules in CEE economies: A Bayesian approach

a r t i c l e i n f o JEL classification: C11 E32 E52 Keywords: New Keynesian models Small open economy Monetary policy Taylor rules Bayesian methods Using the Bayesian approach, a small open economy DSGE model was estimated using a sample of quarterly data for three Central and Eastern Europe economies, Czech Republic, Hungary and Poland. The hypothesis that central banks react to exchange rat...

Challenges of Effective Monetary Policy in Emerging Economies

Modern monetary policy theory and practice have been heavily influenced by the experiences of developed countries, both large and small. A number of these ideas have also made their way into policymaking at central banks in emerging economies, mostly due to the absence of local intellectual alternatives. However, the realities of emerging economies are often at odds with the circumstances of de...