Taylor principle and inflation stability in emerging market countriesw

Vladimir Teles () and Marta Penteado Zaidan

No 197, Textos para discussão from FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil)

Abstract: The goal of this paper is to evaluate the validity of the Taylor principle for inflation control in 12 developing countries that use inflation targeting regimes: Brazil, Chile, Colombia, Hungary, Israel, Mexico, Peru, Philippines, Poland, South Africa, Thailand and Turkey. The test is based on a state-space model to determine when each country has followed the principle; then a threshold unit root test is used to verify if the stationarity of the deviation of the expected inflation from its target depends on compliance with the Taylor principle. The results show that such compliance leads to the stationarity of the deviation of the expected inflation from its target in all cases. Furthermore, in most cases, non-compliance with the Taylor principle leads to nonstationary deviation of the expected inflation.

Date: 2009-08-26
New Economics Papers: this item is included in nep-cba, nep-cwa, nep-mon and nep-sea
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Citations: View citations in EconPapers (2)

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Journal Article: Taylor principle and inflation stability in emerging market countries (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:fgv:eesptd:197

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