Our objective is to show that the Taylor rule monetary policy practice of BEAC its effectiveness limited due structural and cultural heterogeneity currency union. In this light, we identify reaction function it includes additional variables namly, interest rate inflation differential with Euro zone, as well reserve ratio must cover at least 20% issue. Given objectives instruments used built, es...

Abstract This article provides an estimation method to decompose monetary policy innovations into persistent and transitory components using the nonlinear Taylor rule proposed in Andolfatto, Hendry, Moran (2008) [Are inflation expectations rational? Journal of Monetary Economics , 55 406–422]. To use Kalman filter as optimal signal extraction technique, we a convenient reformulation for state e...

This paper studies the economy of Hong Kong through lens a small open DSGE model with currency board exchange rate commitment. It assumes flexible prices and banking system that provides credit to entrepreneurial household firms; money supply is fully backed by reserves under board. We estimate evaluate Indirect Inference over sample period 1994Q1-2018Q3; we find it matches data behaviour as re...