Monetary Policy Rule and Taylor Principle by GMM and DSGE Approaches: The Case of Mongolia
MPRA Paper from University Library of Munich, Germany
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)
New Economics Papers: this item is included in nep-cba, nep-cis, nep-dge, nep-mac, nep-mon, nep-ore and nep-tra
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Published in International Journal of Financial Studies 4.8(2020): pp. 1-16
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:104182
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