Taylor Rule and Monetary Policy in Tunisia

Sghaier, Imen Mohamed
Publication date: 
JEL codes: 
E43 - Interest Rates: Determination, Term Structure, and Effects, E52 - Monetary Policy, E58 - Central Banks and Their Policies.
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 forward-looking models,the response coefficient of expected inflation is greater than 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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