Time-varying discrete monetary policy reaction functions

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Title:	Time-varying discrete monetary policy reaction functions
Authors:	Huang, Ho-chuan;Lin, Shu-chin
Contributors:	淡江大學經濟學系
Date:	2006-03-01
Issue Date:	2009-11-30 18:36:48 (UTC+8)
Publisher:	Taylor & Francis
Abstract:	A novel dynamic ordered probit model with time-varying parameters is proposed to estimate a monetary policy reaction function with narrative-based monetary indicators. The estimation and inference are carried out using the Bayesian simulation-based approach. Empirically, these are the following findings. First, there is strong evidence in support that the Central Bank in Taiwan responds counter-cyclically to inflation but weaker, if any, evidence to economic growth. Secondly, the persistence and consistence in policy-making of the monetary authority is confirmed by the significance of the positive autoregressive coefficient. Although not all, the estimates of the TVP-DOP model provide, at least, partial support of time-varying parameters. Finally, the results indicate that studies of the discrete monetary policy reaction functions without explicitly considering the possible dynamics inherent in the time series data and time-variations in model parameters may be inappropriate, if not incorrect.
Relation:	Applied Economics 38(4), pp.449-464
DOI:	10.1080/00036840500395386
Appears in Collections:	[Graduate Institute & Department of Banking and Finance] Journal Article [Graduate Institute & Department of Economics] Journal Article

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