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Monetary policy rules for transition economies: an empirical analysis

Author

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  • Ghatak, Subrata

    (Kingston University London)

  • Moore, Tomoe

    (Brunel University)

Abstract

In this paper, we innovatively apply both Taylor rule, where an interest rate is used as a policy reaction, and McCallum rule, where monetary base is considered as a policy instrument, for the new EU member states in analysing monetary policy reaction functions. For the Czech Republic, Poland, Slovakia and Slovenia, the Taylor rule is found to be suitable to exchange rate targeting, whereas the McCallum rule may be applicable to inflation targeting. Evidence also reveals that for Hungary and Romania, inflation targeting coexists with that of exchange rates taking account of both reactions of interest rates and money.

Suggested Citation

  • Ghatak, Subrata & Moore, Tomoe, 2008. "Monetary policy rules for transition economies: an empirical analysis," Economics Discussion Papers 2008-5, School of Economics, Kingston University London.
    • Handle: RePEc:ris:kngedp:2008_005
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Monetary policy reaction functions; Taylor Rule; McCallum’s Rule; Transition economies;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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