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ARE TAYLOR RULES VALID IN CENTRAL EASTERN EUROPEAN COUNTRIES?

100%
Wang Y., Jiang C., Chang H.-L., Su C.-W.
Ekonomický časopis (Journal of Economics)
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2015
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vol. 63
|
issue 7
665- 685
EN
This study applies a stationary test with the flexible Fourier function proposed 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.
2

REAL INTEREST RATE PARITY FOR CENTRAL AND EASTERN EUROPEAN COUNTRIES: A NEW UNIT ROOT TEST WITH TWO STRUCTURAL BREAKS

100%
Su C.-W., Jiang X., Chang H.-L.
Ekonomický časopis (Journal of Economics)
|
2014
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vol. 62
|
issue 1
3 – 18
EN
This study applies Narayan and Popp’s (2010) unit-root test with two endogenous breaks, which has been proven to be more powerful than the other unit root tests with two breaks (Narayan and Popp, 2013) to assess the non-stationary properties of the real interest rate parity (RIRP) for thirteen Central and Eastern European (CEE) countries. We examine the validity of RIRP from the unit root with two breaks of view and provide robust evidence which clearly indicates that RIRP holds true for six countries. Our findings point out their real interest rate convergence is mean reversion towards RIRP equilibrium values with two structural breaks. Our results have important policy implications for these CEE countries under study.
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