Are Policy Rules Better Than the Discretionary System in Taiwan?

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

“…Real GDP is positively associated with real depreciation and stock values and negatively influenced by the government deficit/GDP ratio, the federal funds rate, and the expected inflation rate. In comparison, the results of this study are consistent with Cover et al [2002], Chang et al [2002b], and Rong-I Wu [1998b] that discretionary monetary policy is important, that fiscal policy is ineffective, and that currency devaluation would help the economy and are different from Lin and Lee [2002] that the exchange rate policy is neutral.…”

“…During an economic downturn, the central bank took measures to stimulate economic growth. Cover et al [2002] studied the effectiveness of the central bank's monetary policy in Taiwan during 1978Y1999. Three monetary tools and four major targets were considered.…”

Statutory Central Bank Independence in Taiwan

“…Cover, Hueng, and Yau (2002) show that the CBC has been very close to conducting optimal policies in controlling inflation. Figure 1 plots the average inflation against the CWN index for Taiwan along with 24 OECD countries during the period 1980-1989.…”

A structural threshold model of the exchange rate under optimal intervention

“…The CBC has been famous for its policy performance. Comparing standard deviations of many macroeconomic variables with those simulated from more than 60 artificial monetary rules, Cover et al (2002) conclude that the CBC had been very successful in using discretionary policies for three decades before 2000. Due to the great performance of the monetary policies, the Governor of the CBC, Fai-Nan Perng was awarded the World's Top Central Banker title in 2000,2005,2006,2007,2008,2009 and 2010 by Global Finance, and the Central Banker of the Year, Asia, in 2009 by The Banker.…”