MONETARY POLICY RULES FOR EUROPEAN MONETARY UNION ACCEDING COUNTRIES

Iulian Vasile Popescu
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Iulian Vasile Popescu: Alexandru Ioan Cuza University of Iasi, Romania

Studies in Business and Economics, 2013, vol. 8, issue 2, 108-122

Abstract: The identification of central banks (CBs) behavior in setting interest rates may give a conclusive image on both the objectives and on their prioritization. A standard approach in this respect is the estimation of a CB reaction function as a Taylor rule. Since the formulation of the original version, Taylor monetary policy rule has undergone a number of changes and extensions designed to better reflect the monetary policy decisions of central banks. This paper addresses two extensions of Taylor monetary policy rule strictly targeting the current features of the Central and Eastern European (CEE) states, emerging economies with a high degree of openness in the middle of a convergence process towards the euro area. Models are built on the assumption that the monetary authority follows a strategy of flexible inflation targeting (IT) and are estimated using the generalized method of moments (GMM).

Keywords: Taylor rule; monetary policy; Generalized Method of Moments (GMM) (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:blg:journl:v:8:y:2013:i:2:p:108-122

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