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Monetary Policy Rules for a Developing Countries: Evidence from Tunisia

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Author(s): Imen Mohamed Sghaier | Zouheir Abida

Journal: Review of Finance and Banking
ISSN 2067-2713

Volume: 5;
Issue: 1;
Start page: 35;
Date: 2013;
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Keywords: Taylor rule | Monetary policy | Reaction function | GMM

ABSTRACT
This paper estimates the forward-looking monetary policy reaction function of the Central Bank of Tunisia (CBT) using quarterly data from 1993:Q2 to 2011:Q4. Policies which the CBT applied are analyzed according to the Taylor rule. The empirical results indicate that the CBT followed the Taylor rule in its interest setting behaviour. In forwardlooking models, the response coefficient of expected inflation is greater than of the output gap, which is consistent with the fact that inflation is the primary objective of monetary policy. The results of forward-looking models reflect the policies conducted in Tunisia.
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