The taylor rule in emerging economies before and after the 2008 financial crisis
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2023
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en
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This paper looks into the way central banks of the 20 emerging economies, according to the IMF, conduct their monetary policy in a panel data set. This is done by performing a two-step system GMM approach in the period prior to the 2008 financial crisis (2001-2008) and for the period afterwards (2009-2016) while using the Taylor Rule to evaluate their policies. All estimation results of the main model (system GMM) were significant and show that the central banks of the emerging economies partly changed their way conducting monetary policy in the period after the financial crisis. This is shown by the fact that the policies have become procyclical in the period after the crisis while it was countercyclical in the period before the crisis and that interest rates were smoothened even more in the period after the financial crisis. Also, central banks in these countries might have shifted their priorities to saving banks by attracting liquidity instead of maintaining a high level of competitiveness with regards to the real effective exchange rate. The only variable which had the same effect on the conduct of monetary policy was the inflation rate since the central bank policy remained anti-inflationary.
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Faculteit der Managementwetenschappen