Les règles de Taylor à l’épreuve de la révolution : cas de l’Égypte.

baaziz, yosra (2016): Les règles de Taylor à l’épreuve de la révolution : cas de l’Égypte.

Abstract

This paper challenges the suitability of a nonlinear Taylor rule in characterizing the monetary policy behavior of Egyptian central bank), especially in turbulent times. More specifically, we investigate the possibility that the Taylor rule should be formulated as a threshold process and examine the validity of such nonlinear Taylor rule as a robust rule for conducting monetary policy in Egypt. Analytical results show that nonlinear Taylor rule holds and that adopting a nonlinear specification instead of the linear leads to a costs reduction in terms of fit: 90 basis point in 2008-Q4 and 20 basis point in post-revolution.

• Item Type: MPRA Paper
• English Title: The Taylor rule to the test of the revolution: the case of Egypt.
• Language: French
• Keywords: nonlinear Taylor rule; Logistic Smooth Transition Regression (LSTR); special events; costs in terms of fit
• Subjects: E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies

References

Akerlof, G. 1970. “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism.”, Quarterly Journal of Economics, 84(3): 488-500.

Alchian, A. et B. Klein .1973. “On a correct measure of inflation.” journal of money, Credit and Banking, p. 173-191.

Alcidi, C., A. Flamini et A. Fracasso .2011. “Policy regime changes, judgment and Taylor rules in the Greenspan Era.” Economica, 78: 89-107.

Andrade, J.P. et J.A. Divino .2001. “Optimal rules for Monetary Policy in Brazil.” Texto para Discussão, instituto de Pesquisa Econômica aplicada (IPea), p. 806.

Baaziz Y., Labidi M. et Lahiani A. 2013. “Does the South African Reserve Bank follow a nonlinear interest rate reaction function?” Economic Modelling, 35: 272–282.

Baaziz Y., David H., Labidi M. et Lahiani A. 2016. “Unveiling Special Policy Regime, Judgment and Taylor Rules in Tunisia.” The Journal of Applied Business Research, vol. 32, no. 1, pp.

Ball, L. 1999. “Efficient rules for monetary policy.” International finance, 2(1): 63-83.

Barro, R. et D. Gordon .1983. “Rules, discretion and reputation in a model of monetary policy.” Journal of Monetary Economics, 12(1) : 101-121.

Battini, N. et E. Nelson .2000. “Optimal Horizons for inflation Targeting.” Bank of England working, 119.

Bernanke, B. et M. Gertler .1999. “Monetary Policy and asset price volatility.” Federal Reserve Bank of Kansas City Economic Review, 4th Quarter, p. 17-51.

Bernanke, B. et M. Gertler .2001. “Should central Banks respond to movements in asset prices? ” American Economic Review, p. 253-257.

Bernanke, B. 2003. “A Perspective on Inflation Targeting.” Remarks at the Annual Washington Policy Conference on the National Association of Business Economists, WashingtonD.C.

Bernanke, B. et M. Woodford .1997. “Inflation forecasts and monetary policy.” Journal of Money, Credit and Banking, 24: 653-684

Bernard, L. 2008. “Leçons de politique monétaire.” Ouverture économique, Edition de Boeck Université.

Bruggemann, R. et J. Riedel .2010. “Nonlinear Interest Rate Reaction Functions for the UK.” Université de Konstanz , Département de l’Economie, Working Paper Series 2010, 15.

Castelnuovo, E. 2003. “Describing the Fed’s conduct with Taylor Rules: is interest Rate smoothing important?” ECB working paper, 232.

Castro, V. 2008. “Are Central Banks following a linear or nonlinear (augmented) Taylor Rule?” University of Warwick, Department of Economics.

Cecchetti, S. G., G. J. L. Hans, et S. Wadhwani .2000. “Asset Prices and Central Bank Policy.” Geneva Report on the World Economy 2, London: CEPR.

Clarida, R., J. Galí et M. Gertler .1998. “Monetary Policy Rules in practice: Some international evidence.” European Review, 4(6): 1033-1067.

Cukierman, A. 2004. “Nonlinearities in Taylor Rules–Causes, Consequences and Evidence.” Keynote Lecture Presented at the 19 th Economic Annual Meeting of the Central Bank of Uruguay.

Dolado, J., R. Dolores et M. Naveira.2005. “Are Monetary Policy Reaction Functions Asymmetric? The Role of Nonlinearity in the Phillips Curve.” European Economic Review 49: 485-503.

Eitrhem Ø. et T. Terasvirta .1996. “Testing the Adequacy of Smooth Transition Autoregressive Models.” Journal of Econometrics, 74: 59-75.

Fischer, S. 1988. “Macroeconomic Policy.” in International Economic Cooperation, edited by Martin Feldstein, University of Chicago Press for NBER, Chicago.

Fratzcher, M. 2003. “On Currency Crisis and Contagion.” International Journal of Finance and Economics, 8(2) : 345-361.

Friedman, M. 1959. “A Program for Monetary Stability.” Fordham University Press.

Goodhart, C. et B. Hofmann .2001. “Asset Prices, Financial Conditions and the transmission of monetary Policy.” paper presented at the conference on asset prices, Exchange Rate and Montary Policy, Stanford University.

Granger, C.W.J. et T. Terasvirta .1993. “Modelling nonlinear economic relationships.” Oxford University Press, New York.

Hamilton, J.D. 1989. “A new approach to the economic analysis of non-stationary time series and the business cycle.” Econometrica, 57: 357-84.

Jawadi, J., K.M. Sushanta, et M.S. Ricardo .2011. “Monetary Policy Rules in the BRICS: How important is Nonlinearity?”NIPE WP 18/2011, Documentos de Trabalho, Working Paper Series.

Kadilli, A. et N. Markov .2011. “A Panel Smooth Transition Regression Model for the Determinants of Inflation Expectations and Credibility in the ECB and the Recent Financial Crisis.” Working Paper Series, 11092.

Kesriyeli, M., D.R. Osborn, et S. Marianne .2006. “Nonlinearity and Structural Changes in Interest Rate Reaction Functions or the US, UK and Germany.” In Nonlinear Time Series Analysis of Business Cycles.

Kenneth, R.1999. “International Institution for reducing global Financial Instability”, The Journal of Economic Perspectives, 13(4): 21-42.

Kydland, F., et E. Prescott .1977. “Rules Rather than Discretion: The Inconsistency of Optimal Plans.” Journal of Political Economy, 85: 473-91.

Lee, D.J et J.C. Son .2011. “Nonlinearity and Structural Breaks in Monetary Policy Rules with Stock Prices.” Working Paper, 19.

Mankiw, G. 1990. “A Quick Refresher Course in Macroeconomics », Journal of Economie Littérature, XXVIII: 1645-1660.

Mello, L., D. Moccero et M. Mogliani .2009. “Do Latin American Central Bankers Behave Non-Linearly? The Experience of Brazil, Chile, Colombia and Mexico.” OECD Economics Department Working Papers, 679.

McCallum, B. T. 1988. “Robustness Properties of a Rule for Monetary Policy.” Carnegie-Rochester Conférence Séries on Public Policy, 29 : 173-204

McMillan, D.G. 2009. “Forecasting Stock Returns: Does Switching Between Models Help?” SSRN eLibrary.

Mésonnier, J.S. 2004. “ Le paradoxe de la crédibilité en question.” Etude. Bulletin de la banque de France, 122.

Mishkin, F.S. 1999. “International Experiences with Different Monetary Policy Regimes.” Journal of Monetary Economics, 43(3): 579-606.

Mishkin Frederic S. 2009. “Is Monetary Policy Effective during Financial crises”, American Economic Review, p. 573-577.

Mora, M.L. et A. Carvalho. 2010. “What can Taylor rule say about monetary policy in Latin America?” Journal of Macroeconomics 32: 392–404.

Mthuli, N. et M.T. Mthokozisi .2010. “Monetary policy conduct Based on Nonlinear Taylor Rule: Evidence from South Africa.” African Development Bank Group, Working Paper Series, 113.

Naraidoo, R. et N. Kasaï .2010. “Financial assets, linear and nonlinear Policy Rule; an in sample assessment of reaction function of the south African Reserve Bank.” University of Pretoria, Working Paper 2010, 6.

Nobay, R. and D. Peel. 2003. “Optimal discretionary monetary policy in a model of asymmetric central bank preferences.” Economic Journal 113: 657-665.

Olmedo, A. 2002. “Asymmetries in the Central Bank Behaviour », THEMA (Théorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.

Olsen, E., W. Enders. M.E. Vohar. 2012. “An empirical investigation of the Taylor curve.” Journal of Macroeconomics.” 34: 380–390.

Petersen, K. 2007. “Does the Federal Reserve Follow a Nonlinear Taylor Rule?” University of Connecticut, Department of Economics.

Pisani-Ferry, J.2008. “ Politique économique: avons-nous appris? ” Revue économique, 59(3) : 387-412.

Romer, D. 2000. “Keynesian Macroeconomics without LM Curve.” Journal of Economic Perspectives, 14(2).

Rudebusch, G.D. 2002. “Term Structure evidence on interest rate smoothing and Monetary policy inertia.” journal of Monetary Economics, 49: 1161-1187.

Salgado, M.J.S., M.G.P. Garcia, et M.C. Medeiros .2005. “Monetary Policy during Brazil’s Real Plan: Estimating the Central bank’s Reaction function.” Revista de Economica Politica 59(1): 79.

Schaling, E. 1998. “The Nonlinear Phillips Curve and Inflation Forecast Targeting.” Bank of England working paper.

Stiglitz, J. 2000. “The Contributions of the Economics of Information to Twentieth Century Economics.” Quarterly Journal of Economics, 115(4): 1441-1478.

Svensson, L.E.O. 2003. “What Is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules.” Journal of Economic Literature, 42(2): 426-477.

Svensson, L.E.O. 2010. “Monetary Policy and Financial Markets at the Effective Lower Bound.” Journal of Money, Credit and Banking, 42: 229-242.

Surico, P. 2004. “Inflation Targeting and Nonlinear Policy Rules: The case of Asymmetric Preferences .” CESifo working paper, p. 1280.

Surico, P. 2007. “The Fed's Monetary Policy Rule and US Inflation: The Case of Asymmetric Preferences.” Journal of Economic Dynamics and Control 31: 305-324.

Sylvain, F.T. 2003. “ L’année brésilienne 2002: l’économie sous l’effet Lula.” Observatoire des Amériques, Université du Québec à Montréal.

Taylor, J.B. 1993. “Discretion versus policy rules in practice.” Carnegie-Rochester conference series on public policy, pp. 195-214.

Taylor, J.B. 2000. “Using monetary policy rules in emerging market economies.” Revised paper presented at the 75 th anniversary conference at the Banco de Mexico.

Taylor, M.P. et E. Davradakis .2006. “Interest rate setting and inflation targeting: evidence of a nonlinear Taylor rule for the United Kingdom.” Studies in Nonlinear Dynamics & Econometrics, 10(4): 1359.

Terasvirta, T.1998. “Modeling economic relationships with smooth transition regressions.” A. Ullah et D.E Giles (eds), Handbook of Applied Economic Statistics, Marcel Dekker Inc. NY, 15 : 507-552 .

Terasvirta, T. 2004. “Smooth transition regression modelling.” H.Lutkepohl et M.Kratzig (eds). Applied Time Series Econometrics, Cambridge University Press, 6: 222-242.

Van, D., Teraesvirta, T. et P.H. Franses .2002. “Smooth transition autoregression models - A survey of recent developments.” Econometric Reviews, 21: 1-47.

Vickers, J. 1999. “ Monetary policy and asset prices”, Lecture given at money, Macro and Finance Group, 31St Annual Conference, Oxford University, England.

Wesche, K. 2003. “Monetary Policy in Europe Evidence from Time-Varying Taylor Rules.” Bonn Econ Discussion Papers, 2.

Woodford, M. 2001. “The Taylor Rule and Optimal Monetary Policy.” American Economic Review, 91(2): 232-37

Yilmazkuday, H. 2008. “Structural Breaks in Monetary Policy Rules: Evidence from Transition Countries.” SSRN eLibrary.