 Active and Passive Monetary Policy in CEE Countries with Inflation Targeting: The Case of the Czech Republic, Hungary, and PolandEastern European Economics, 2016, vol. 54, issue 2, 133-152 Abstract: The concept of nonlinear Taylor rules describing behavior of the central banks becomes popular in the literature. In this paper we estimate Markov switching Taylor rules for three CEE economies: the Czech Republic, Hungary and Poland, all being inflation targeters. For the robustness purposes we estimate several different specifications of the Taylor rule: backward- and forward-looking, with inflation and inflation gap as explaining variables. As the analyzed CEE countries are small open economies additional variables are included to the standard Taylor rule: foreign interest rate and exchange rate. We find that two regimes of monetary policy may be distinguished: passive and active regime. The passive regime, which seems dominant, is characterized by strong smoothing of the interest rate path and little response to inflation and output gap developments. In the active regime the smoothing parameter decreases and the reaction to inflation and/or output gap is stronger. Date: 2016 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:mes:eaeuec:v:54:y:2016:i:2:p:133-152 Ordering information: This journal article can be ordered from DOI: 10.1080/00128775.2015.1126789 Access Statistics for this article More articles in Eastern European Economics from Taylor & Francis Journals |
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