The Relationship Between Price Stability and Financial Stability: Evidence From Major Emerging Economies
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Date
2019
Journal Title
Journal ISSN
Volume Title
Publisher
Routledge Journals, Taylor & Francis Ltd
Access Rights
info:eu-repo/semantics/closedAccess
Abstract
We examine the relationship between price stability and financial stability for major emerging economies using a Markov regime-switching model. Empirical results suggest that monetary policy is consistent with the Taylor rule in all countries except for India and all countries followed both low and high inflation targeting monetary policy regimes. Low inflation targeting regime seems to be more persistent and has higher duration than high inflation targeting regimes except for Indonesia and South Africa. All countries seem to have had financial stability concerns when they formulated their monetary policy as the coefficient of the financial stress index is statistically significant at least in one regime. Overall the results suggest that Taylor rule-based monetary policies have been implemented to various degrees in major emerging economies to achieve economic stability, price stability, and financial stability.
Description
Keywords
Monetary policy, financial stability, Taylor rule, emerging markets, Markov regime switching model, Monetary-Policy Rules, Stress
Journal or Series
Global Economic Review
WoS Q Value
Q4
Scopus Q Value
Q2
Volume
48
Issue
1
