Monetary policy as a decision-making hierarchy: The case of Taiwan

Hawk or dove: Switching regression model for the monetary policy reaction function in China

“…Assenmacher-Wesche (2006) showed that the central banks of the United States and Germany have smaller coefficients of output gap at high inflation, which is in accordance with the "hawk regime hypothesis" that specifically pays more attention to inflation than output. Moreover, Shen and Hakes (1995) observed that the central bank of Taiwan adopts "the growth when inflation is not a concern" policy.…”

“…Shen and Hakes (1995) performed an empirical analysis to test whether the central bank was chiefly concerned about inflation when price stability was threatened. They revealed that a high economic growth was prioritized than price stability under a moderate or low inflation.…”

“…For example, the stagflation during the second oil crisis in 1982 prompted a heated debate on whether central banks should tighten their monetary policies to depress inflation or adopt an easy monetary policy to stimulate economic growth. This 1 Please refer to Shen and Hakes (1995); Huang and Shen (2001); Huang and Shen (2002); Rigobon and Sack (2003); Dolado et al (2005); Wolters (2012). 2 No strict theoretical base for the "dove regime" and "hawk regime" hypotheses exists, except for the simple model of Owyang and Ramey (2004).…”

“…2 Owyang and Ramey (2004) and Assenmacher-Wesche (2006) observed that the central banks of the United States and Germany reflected the "hawk regime hypothesis," which indicated that these central banks emphasized the problem of inflation. Shen and Hakes (1995) used inflation rate as a threshold to separate their sample into high and low inflation regimes. They used data from Taiwan and reported similar asymmetric results when the central banks reacted to growth at inflation rates of below 3.8% (dove regime) and when they reacted to inflation when the inflation rates exceeded their threshold (hawk regime).…”

Analysis of Output Fluctuations in Taiwan: An Application of the IS–MP–AS Model

“…Shen and Hakes [1995] examined the CBC's monetary reaction function based on different stages of inflation. Without any inflationary pressure, the CBC would react to both inflation and output.…”