Texas A&M University
Suh, Jeong Eui.
Two essays on monetary policy under the Taylor rule.
Degree: PhD, Economics, 2005, Texas A&M University
In this dissertation, two questions concerning monetary policy under the Taylor rule have been addressed. The ﬁrst question is on, under the Taylor rule, whether a central bank should be responsible for both bank supervision and monetary policy or whether the two tasks should be exercised by separate institutions. This is the main focus of Chapter I. The second question is on whether the Taylor rule plays an important role in explaining modern business cycles in the United States. The second question has been covered by Chapter II.
The implications of the ﬁrst chapter can be summarized as follows: (i) it is inevitable for the central bank to have a systematic error in conducting monetary policy when the central bank does not have a bank supervisory role; (ii) without a bank supervisory role, the eﬀectiveness of monetary policy cannot be guaranteed; (iii) because of the existence of conﬂict of interests, giving a bank supervisory role to the central bank does not guarantee the eﬀectiveness of monetary policy, either; (iv) the way of setting up another government agency, bank regulator, and making the central bank and the regulator cooperate each other does not guarantee the eﬀectiveness of monetary policy because, in this way, the systematic error in conducting monetary policy cannot be eliminated; (v) in the view of social welfare, not in the view of the eﬀectiveness of monetary policy, it is better for the central bank to keep the whole responsibility or at least a partial responsibility on bank supervision.
In the second chapter, we examined the eﬀect of a technology shock and a money shock in the context of an RBC model incorporating the Taylor rule as the Fed??s monetary policy. One thing signiﬁcantly diﬀerent from other researches on this topic is the way the Taylor rule is introduced in the model. In this chapter, the Taylor rule is introduced by considering the relationship among the Fisher equation, Euler equation and the Taylor rule explicitly in the dynamic system of the relevant RBC model. With this approach, it has been shown that, even in a ﬂexible-price environment, the two major failures in RBC models with money can be resolved. Under the Taylor rule, the correlation between output and inﬂation appears to be positive and the response of our model economy to a shock is persistent. Furthermore, the possibility of an existing liquidity eﬀect is found. These results imply that the Taylor rule does play a key role in explaining business cycles in the United States.
Advisors/Committee Members: Goldberg, Dror (advisor), Li, Qi (advisor), Seo, Byeongseon (committee member), Gawande, Kishore (committee member).
Subjects/Keywords: Monetary Policy; Bank Supervision; Game-theoretic Approach; Taylor Rule; Business Cycles; Dynamic General Equilibrium Model
to Zotero / EndNote / Reference
APA (6th Edition):
Suh, J. E. (2005). Two essays on monetary policy under the Taylor rule. (Doctoral Dissertation). Texas A&M University. Retrieved from http://hdl.handle.net/1969.1/2748
Chicago Manual of Style (16th Edition):
Suh, Jeong Eui. “Two essays on monetary policy under the Taylor rule.” 2005. Doctoral Dissertation, Texas A&M University. Accessed October 31, 2020.
MLA Handbook (7th Edition):
Suh, Jeong Eui. “Two essays on monetary policy under the Taylor rule.” 2005. Web. 31 Oct 2020.
Suh JE. Two essays on monetary policy under the Taylor rule. [Internet] [Doctoral dissertation]. Texas A&M University; 2005. [cited 2020 Oct 31].
Available from: http://hdl.handle.net/1969.1/2748.
Council of Science Editors:
Suh JE. Two essays on monetary policy under the Taylor rule. [Doctoral Dissertation]. Texas A&M University; 2005. Available from: http://hdl.handle.net/1969.1/2748