Assessing McCallum and Taylor rules in a cross-section of emerging market economies

The paper estimates McCallum and Taylor monetary policy reaction functions, hybrids mixing instruments and targets from the two frameworks, and nominal feedback mechanisms for 20 emerging market economies. The choice of framework employed in analysing each country is informed by the corresponding institutional setting. McCallum–Taylor specifications with an interest rate instrument and a nominal income gap target perform better than benchmark Taylor reaction functions in describing monetary policy in inflation targeting economies. Estimating reaction functions for economies operating monetary and exchange rate targeting regimes produces mixed results, while the nominal feedback rules reveal a lean-with-the-wind behaviour in two out of three economies.