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In: Ekonomický časopis/Journal of Economics, vol. 63, no. 7
Yi Wang - Chun Jiang - Hsu-Ling Chang - Chi-Wei Su

Are Taylor Rules Valid in Central Eastern European Countries?

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Year, pages: 2015, 665 - 685
Keywords: Taylor rules, Fourier Stationary Test, structural change, trend breaks JEL Classification: C22, F36
Article type: Vedecký / Article

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This study applies a stationary test with the flexible Fourier function pro-posed by Enders and Lee (2012) to test the validity of Taylor rules to assess the non-stationary properties of the convergence of the real exchange rates for ten Central Eastern European countries. We find that our approximation has a higher power to detect U-shaped breaks and smooth breaks than the linear method if the true data-generating process of exchange rate convergence is in fact a stationary non-linear process. We examine the validity of Taylor rules from the non-linear point of view and provide robust evidence that Taylor rules holds true for seven Central Eastern European countries. These results imply that the choices and effectiveness of the monetary policies in Central Eastern European economies are highly influenced by Taylor rule, and also influenced by external factors originating from the United States.

This study applies a stationary test with the flexible Fourier function pro-posed by Enders and Lee (2012) to test the validity of Taylor rules to assess the non-stationary properties of the convergence of the real exchange rates for ten Central Eastern European countries. We find that our approximation has a higher power to detect U-shaped breaks and smooth breaks than the linear method if the true data-generating process of exchange rate convergence is in fact a stationary non-linear process. We examine the validity of Taylor rules from the non-linear point of view and provide robust evidence that Taylor rules holds true for seven Central Eastern European countries. These results imply that the choices and effectiveness of the monetary policies in Central Eastern European economies are highly influenced by Taylor rule, and also influenced by external factors originating from the United States.

How to cite:

ISO 690:
Wang, Y., Jiang, C., Chang, H., Su, C. 2015. Are Taylor Rules Valid in Central Eastern European Countries?. In Ekonomický časopis/Journal of Economics, vol. 63, no.7, pp. 665-685. ISSN 0013-3035.

APA:
Wang, Y., Jiang, C., Chang, H., Su, C. (2015). Are Taylor Rules Valid in Central Eastern European Countries?. Ekonomický časopis/Journal of Economics, 63(7), 665-685. ISSN 0013-3035.