Monetary Policy Rule and Taylor Principle in Emerging ASEAN Economies: GMM and DSGE Approaches

Taguchi, Hiroyuki (2020): Monetary Policy Rule and Taylor Principle in Emerging ASEAN Economies: GMM and DSGE Approaches. Published in: Bulletin of Applied Economics , Vol. 7, No. 2 (June 2020): pp. 35-47.

Abstract

This paper aims to reassess the performances of inflation targeting adopted by emerging ASEAN countries, Indonesia, the Philippines and Thailand, by examining their monetary policy rules, both through generalized-method-of-moments (GMM) estimations of policy reaction functions and through Bayesian estimations of the New Keynesian dynamic-stochastic-general-equilibrium (DSGE) model. The main findings are summarized as follows. First, the GMM estimations identified inflation-responsive rules fulfilling the Taylor principle, with a forward-looking manner in Indonesia and Thailand and with a contemporaneous way in the Philippines. Second, the Bayesian estimations of the New Keynesian DSGE could reassure the GMM estimation results, as the former estimations produced consistent outcomes with the latter ones on the policy rate reactions to inflation with the Taylor principle.

• Item Type: MPRA Paper
• Language: English
• Keywords: Taylor principle; Inflation targeting; Emerging ASEAN; Generalized method of moments (GMM); New Keynesian dynamic stochastic general equilibrium (DSGE)
• 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; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O53 - Asia including Middle East

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