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Economies 2016, 4(2), 6; doi:10.3390/economies4020006

Nonlinear Monetary Policy Rules: An Essay in the Comparative Study on Egyptian and Tunisian Central Banks

Monnaie Modélisation Financement Développement (MOFID), University of Sousse, Sousse 4003, Tunisia
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Academic Editor: Hans-Eggert Reimers
Received: 23 November 2015 / Revised: 11 March 2016 / Accepted: 1 April 2016 / Published: 11 April 2016
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Abstract

The purpose of this paper is to evaluate the behavior of monetary authorities in Tunisia and Egypt, in response to changes in macroeconomic variables over time based on LSTR model. In this sense, we estimate Taylor-type equations for short-term interest rate in Tunisia and Egypt using quarterly data covering the period 1998.Q4–2013.Q2. We find strong evidence that the real decision-making process followed by these central banks varies from one central bank to another and that it exhibits nonlinear patterns that better capture special events and unexpected contingencies i.e., the terrorist attack in the US in September 2001, the global financial crisis in 2008, and the effect of political instability with the onset of the revolution. Additionally, the presence of asymmetries in the reaction function of the Tunisian and Egyptian Bank requires disconnection from their automatic pilot rules and use of judgement to make decisions. View Full-Text
Keywords: policy rule; central bank; exchange rate; Taylor rule; nonlinearity policy rule; central bank; exchange rate; Taylor rule; nonlinearity
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Baaziz, Y.; Labidi, M. Nonlinear Monetary Policy Rules: An Essay in the Comparative Study on Egyptian and Tunisian Central Banks. Economies 2016, 4, 6.

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