'Ex-ante' Taylor rules and expectation forming in emerging markets

摘要

The success of monetary policy in stabilizing inflation depends substantially on its influence on expectation formation of private agents. This paper provides a novel perspective on the expectation forming process of financial markets. Using forecasts for the short-term interest rate, the inflation rate, and output growth for 10 emerging markets in Latin-America, central and eastern Europe, we estimate expected ("ex-ante") Taylor-type rules. We find evidence for significant differences in the expectation formation process in the sense that the well-known Taylor principle fairly holds for only some countries, while for the other countries it does not. The adaption of an explicit inflation targeting regime seems to explain this cross-country differences. Journal of Comparative Economics xxx (xx) (2011) xxx-xxx. WHU - Otto Beisheim School of Management, Burgplatz 2,56179 Vallendar, Germany; Center for European Studies (CEUS), Burgplatz 2, 56179 Vallendar, Germany.