Testing the Validity of Taylor's Rule on Developing Countries for Effective Financial Marketing

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Author(s): Ali Doğdu (Konya Food and Agriculture University, Turkey), Gökçe Kurucu (Konya Food and Agriculture University, Turkey)and İhsan Erdem Kayral (Konya Food and Agriculture University, Turkey)
Copyright: 2020
Pages: 21
Source title: Handbook of Research on Decision-Making Techniques in Financial Marketing
Source Author(s)/Editor(s): Hasan Dinçer (Istanbul Medipol University, Turkey)and Serhat Yüksel (İstanbul Medipol University, Turkey)
DOI: 10.4018/978-1-7998-2559-3.ch021

Keywords: Accounting & Finance / Business & Management / Business Science Reference / Marketing and Consumer Behavior

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Abstract

This chapter examines whether the central bank policy behaviors of E-7 countries are valid by using a Taylor type monetary policy response function. In this context, the policy response function of banks is analyzed by using monthly data for the 2008-2018 period. Then, unit root tests of ADF (Augmented Dickey Fuller), PP (Philips Perron), IPS (Im Peseran Shin) and LLC (Levin Lin Chu) were performed and analyzed by using Dumitrescu-Hurlin methodology. As a result of the analyses conducted using inflationary data, it was observed that short-term interest rates of the central bank affect price stability by causing inflation, but inflation rates did not cause an increase or decrease in short-term interest rates. According to the findings, although inflation does not cause interest rates to change in E7 countries, a causality relationship has emerged from interest rates to inflation rates. These results indicate that the monetary policies implemented in these countries are not carried out in accordance with the Taylor rule.

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Testing the Validity of Taylor's Rule on Developing Countries for Effective Financial Marketing

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