The central bank’s monetary policy targets are usually assumed to be constant overtime for simplicity when estimating a Taylor rule, but recent studies have shed some light on the time variation in policy targets, especially in the inflation target. The potential bias due to misspecification of the time variation can be quite considerable, especially in regime-swtiching models. In this paper, w...

This paper investigates whether Taylor rule can better guide the monetary policy in developing economies. Existing literatures do not focus on the implementability of rule-based monetary policy in emerging economies. In last two decades a number of industrialised countries have gained success in achieving macroeconomic policy goals by switching to rule-based policy regime from discretionary fra...

This paper uses simulation techniques to evaluate variants of the Taylor rule in a model where the underlying trend rate of growth is subject to permanent shifts. We show that the original Taylor rule is not particularly well-formulated for dealing with this type of environment. However, we also find that a Taylor-type rule in which the output gap is replaced by output growth or one that is aug...