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Heterogeneity across emerging market central bank reaction functions

Author

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  • Mesut Turkay

Abstract

The purpose of this study is to analyze monetary policy reaction functions of inflation targeting emerging market economies. Heterogeneity across central bank behavior is modelled using dynamic common correlated effects estimator in a panel data framework of 15 countries. The empirical method allows us to obtain country specific coefficients and shows differences across central bank reaction functions. Model results imply that central banks behave according to an extended Taylor rule and respond to deviation of inflation from the target, output gap, real exchange rate and external financial conditions. The study finds that emerging market central banks consider not only price stability, but also financial stability in setting of interest rates.

Suggested Citation

  • Mesut Turkay, 2017. "Heterogeneity across emerging market central bank reaction functions," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 17(3), pages 111–116-1.
    • Handle: RePEc:tcb:cebare:v:17:y:2017:i:3:p:111-116
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    Cited by:

    1. Adewale Samuel Hassan, 2022. "Does Country Risk Influence Foreign Direct Investment Inflows? A Case of the Visegrád Four," Economies, MDPI, vol. 10(9), pages 1-22, September.
    2. Kovalenko Mykola & Ziuz Dmytro & Nakisko Oleksandr & Rudenko Serhii & Ryzhikova Natalia, 2018. "Improvement of the emissional component of the banking system as the factor of activation of the investment process," Technology audit and production reserves, 2(40) 2018, Socionet;Technology audit and production reserves, vol. 2(5(40)), pages 45-50.
    3. Anushka Verma & Arun K. Giri & Byomakesh Debata, 2023. "Does ICT diffusion reduce poverty? Evidence from SAARC countries," Poverty & Public Policy, John Wiley & Sons, vol. 15(1), pages 8-28, March.

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