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Monetary Policy Rule and Taylor Principle in Mongolia: GMM and DSGE Approaches

Author

Listed:
  • Hiroyuki Taguchi

    (Graduate School of Humanities and Social Sciences, Saitama University, 225 Shimo-Okubo, Sakura-ku, Saitama 338-8570, Japan)

  • Ganbayar Gunbileg

    (Graduate School of Humanities and Social Sciences, Saitama University, 225 Shimo-Okubo, Sakura-ku, Saitama 338-8570, Japan)

Abstract
This article aims to examine the monetary policy rule under an inflation targeting in Mongolia with a focus on its conformity to the Taylor principle, through two kinds of approaches: a monetary policy reaction function by the generalized-method-of-moments (GMM) estimation and a New Keynesian dynamic stochastic general equilibrium (DSGE) model with a small open economy version by the Bayesian estimation. The main findings are summarized as follows. First, the GMM estimation identified an inflation-responsive rule fulfilling the Taylor principle in the recent phase of the Mongolian inflation targeting. Second, the DSGE-model estimation endorsed the GMM estimation by producing a consistent outcome on the Mongolian monetary policy rule. Third, the Mongolian rule was estimated to have a weaker response to inflation than the rules of the other emerging Asian adopters of an inflation targeting.

Suggested Citation

  • Hiroyuki Taguchi & Ganbayar Gunbileg, 2020. "Monetary Policy Rule and Taylor Principle in Mongolia: GMM and DSGE Approaches," IJFS, MDPI, vol. 8(4), pages 1-16, November.
    • Handle: RePEc:gam:jijfss:v:8:y:2020:i:4:p:71-:d:445679
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    References listed on IDEAS

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    Cited by:

    1. Gunbileg Ganbayar, 2021. "Analysis of External Debt Sustainability in Mongolia: an Estimated DSGE Approach," Sustainability, MDPI, vol. 13(15), pages 1-17, July.
    2. Gunbileg Ganbayar, 2021. "An Investigation into the Sources of Depreciations in Mongolian Tugrik Exchange Rate: A Structural VAR Approach," JRFM, MDPI, vol. 14(11), pages 1-16, November.
    3. Bhavesh Garg, 2023. "Effectiveness of Monetary and Fiscal Policy in Mitigating Pandemic-Induced Macroeconomic Impacts," Working Papers DP-2023-20, Economic Research Institute for ASEAN and East Asia (ERIA).

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    More about this item

    Keywords

    monetary policy rule; Taylor principle; Mongolia; inflation targeting; GMM; the New Keynesian DSGE model; ; E52; E58; O53;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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