Is Monetary Policy in New Members States Asymmetric?

Bořek Vašíček ()

No wp1005, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: Estimated Taylor rules became popular as a description of monetary policy conduct. There are numerous reasons why real monetary policy can be asymmetric and estimated Taylor rule nonlinear. This paper tests whether monetary policy can be described as asymmetric in three new European Union (EU) members (the Czech Republic, Hungary and Poland), which apply an inflation targeting regime. Two different empirical frameworks are used: (i) a Generalized Method of Moments (GMM) estimation of models that allow discrimination between the sources of potential policy asymmetry but are conditioned by specific underlying relations (Dolado et al., 2004, 2005; Surico, 2007a,b); and (ii) a flexible framework of sample splitting where nonlinearity enters via a threshold variable and monetary policy is allowed to switch between regimes (Hansen, 2000; Caner and Hansen, 2004). We find generally little evidence for asymmetric policy driven by nonlinearities in economic systems, some evidence for asymmetric preferences and some interesting evidence on policy switches driven by the intensity of financial distress in the economy.

Keywords: monetary policy; inflation targeting; nonlinear Taylor rules; threshold estimation (search for similar items in EconPapers)
JEL-codes: C32 E52 E58 (search for similar items in EconPapers)
Pages: pages
Date: 2010-12-01
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac, nep-mon and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Is monetary policy in the new EU member states asymmetric? (2012)
Working Paper: Is Monetary Policy in the New EU Member States Asymmetric? (2011)
Working Paper: Is Monetary Policy in New Members States Asymmetric? (2010)
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