Taylor Rule in Taiwan：An Empirical Study

• Main Authors: Wen-Hsuan Sung, 宋文軒
• Other Authors: Ching-Yi Chiang
• Format: Others
• Language: zh-TW
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/cwsqxt

碩士 === 銘傳大學 === 經濟學研究所 === 92 === Macroeconomists have long been interested in modeling the central bank''s reaction function. The central bank''s reaction function plays an important role in a wide variety of macroeconomic analyses. It can provide a basis for forecasting changes in the central bank''s policy instrument; the reaction function is an important element in evaluating central bank policy and the effects of other policy actions. This paper uses“The Taylor Rule” to investigate if the central bank in Taiwan adopts “The Taylor Rule” to manage Taiwan''s economy. It is found that central bank in Taiwan does not adopt“The Taylor Rule” to manage Taiwan''s economy. So, this paper estimates dynamic Taylor-type reaction functions to capture important elements of the policy regimes. From the empirical evidence, I found that inflation rate may be not an important element when the central bank implements momentary policy. I also found that the exchange rate is a significant variable to explain the interest rate, and that lagged interest rate target, output gap and lagged output gap will influence interest rate. However the dynamic Taylor-Rule is not a stable reaction function, implying it can not be used in implementing monetary policy.