| ID | 110249 |
| Title Proper | Estimating forward-looking rules for China's monetary policy |
| Other Title Information | a regime-switching perspective |
| Language | ENG |
| Author | Zheng, Tingguo ; Wang, Xia ; Guo, Huiming |
| Publication | 2012. |
| Summary / Abstract (Note) | This paper introduces a regime-switching forward-looking Taylor rule to describe the monetary policy behavior and considers its estimation using a two-step MLE procedure due to Kim and Nelson (2006), Kim (2009) and Zheng and Wang (2010). By doing an empirical analysis on quarterly data for China over the period 1992-2010, our results show that the actual reactions of China's monetary policy can be well characterized by a two-regime forward-looking Taylor rule. Furthermore, it is also suggested that the interest rate policy in response to inflation and output gap is asymmetric, behaving a significant characteristic of regime-switching nonlinearity. Specifically, in the first regime the People's Bank of China targets inflation, but not focuses on the output gap; while in the second regime the central bank targets the output gap and the policy rule is not a stable framework. |
| `In' analytical Note | China Economic Review Vol. 23, No.1; Mar 2012: p.47-59 |
| Journal Source | China Economic Review Vol. 23, No.1; Mar 2012: p.47-59 |
| Key Words | Taylor Rule ; Regime Switching ; Forward - Looking ; Monetary Policy |