Monetary Policy Rule and Taylor Principle by GMM and DSGE Approaches: The Case of Mongolia

Hiroyuki Taguchi (tagusaya0710@s3.wh.qit.ne.jp)

MPRA Paper from University Library of Munich, Germany

Abstract: This article aims to examine the monetary policy rule under inflation targeting in Mongolia with a focus on its conformity to the Taylor principle, through the two kinds of approaches: a monetary policy reaction function by the generalized-method-of-moments (GMM) estimation and the New Keynesian dynamic stochastic general equilibrium (DSGE) model with a small open economy version by the Bayesian estimation. The main findings are summarized as follows. First, the GMM estimation identified the inflation-responsive rule fulfilling the Taylor principle in the recent phase of the Mongolian inflation targeting. Second, the DSGE-model estimation endorsed the GMM estimation by producing a consistent outcome on the Mongolian monetary policy rule. Third, the Mongolian rule was estimated to have a weaker response to inflation than the rules of the other emerging Asian adopters of inflation targeting.

Keywords: Monetary policy rule; Taylor Principle; Mongolia; Inflation targeting; monetary policy reaction function; GMM; the New Keynesian DSGE model (search for similar items in EconPapers)
JEL-codes: E52 E58 O53 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-cba, nep-cis, nep-dge, nep-mac, nep-mon, nep-ore and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published in International Journal of Financial Studies 4.8(2020): pp. 1-16

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