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Tracing the Monetary Policy Reaction Functions for the Case of a Small Developing Economy

Author

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  • Arief Ramayandi

    (Department of Economics, Padjadjaran University)

Abstract

The paper outlines some alternative methodologies for estimating the monetary policy reaction function. It also discusses some of the advantages and disadvantages for each available alternative to be implemented in the case of small developing economies. Additionally, a simple case study using Indonesia’s data set was carried out. The result indicates that an estimated simple backward-looking reaction function is capable of capturing the path of policy instrument variable quite well.

Suggested Citation

  • Arief Ramayandi, 2003. "Tracing the Monetary Policy Reaction Functions for the Case of a Small Developing Economy," Working Papers in Economics and Development Studies (WoPEDS) 200301, Department of Economics, Padjadjaran University, revised Oct 2003.
    • Handle: RePEc:unp:wpaper:200301
    as

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    File URL: http://ceds.feb.unpad.ac.id/wopeds/200301.pdf
    File Function: First version, 2001
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    References listed on IDEAS

    as
    1. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 379-408.
    2. Bennett T. McCallum & Edward Nelson, 1999. "Performance of Operational Policy Rules in an Estimated Semiclassical Structural Model," NBER Chapters, in: Monetary Policy Rules, pages 15-56, National Bureau of Economic Research, Inc.
    3. Carl E. Walsh, 2003. "Monetary Theory and Policy, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232316, April.
    4. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1.
    5. Jeffery D Amato & Stefan Gerlach, 2001. "Modelling the transmission mechanism of monetary policy in emerging market countries using prior information," BIS Papers chapters, in: Bank for International Settlements (ed.), Modelling aspects of the inflation process and the monetary transmission mechanism in emerging market countries, volume 8, pages 264-272, Bank for International Settlements.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Monetary policy; small open economy;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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