A Monetary Target Model: The Case of Taiwan

This paper proposes a methodology to estimate the monetary target and the probability of monetary intervention in Taiwan. The methodology is based on the estimation of a regime switching model. Empirical results show that a target band between 0.95 and 2.17 percent per month has been in effect, and...

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Bibliographic Details
Published in:Pacific economic review (Oxford, England) England), 1998-02, Vol.3 (1), p.71-81
Main Authors: Cheng, Jen-Chi, Huang, Cliff J.
Format: Article
Language:English
Online Access:Get full text
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Summary:This paper proposes a methodology to estimate the monetary target and the probability of monetary intervention in Taiwan. The methodology is based on the estimation of a regime switching model. Empirical results show that a target band between 0.95 and 2.17 percent per month has been in effect, and most often the monetary authority has followed a non‐interventionist policy. It is probable that the monetary authority engaged in an expansionary policy when intervention was warranted. Adjustments of the rediscount rate by the central bank were found to be consistent with the magnitude of the intervention pressure as predicted by the model.
ISSN:1361-374X
1468-0106
DOI:10.1111/1468-0106.00042