Sardor Sadykov


Uzbekistan and foreign studies prove that the policy of central banks can be described by one or another version of the Taylor Rule. The Taylor Rule is a rule of a monetary policy, which defines how the interest rate changes in case of a change in GDP and inflation indicators. In particular, it states that for each percent of inflation growth a central bank has to increase the nominal interest rate by more than one percentage point. This aspect is often called the Taylor principle. We made an empirical assessment of the efficiency of the Central Bank of Uzbekistan policy and built an econometric model based on the nonlinear least square method. We used the data on inflation rate and GDP size from the official site of the Department of statistics of Uzbekistan, and the inflation data from annual reports of the Central Bank of Uzbekistan on principal direction of the unified State monetary policy. We calculated the GDP gap as a difference between the quarterly GDP value and its trend generated with the help of the Hodrick–Prescott filter. The results of the developed model enabled to conclude that all indicators turned out to be significant. According to the original Taylor’s work, the coefficient of inflation gap is 1.5, and the coefficient of GDP gap is 0.5. In our case, the coefficient of inflation gap was lower and made 1.13, and the coefficient of GDP gap – 0.4. On the basis of our calculations (the Chow test and evaluation of two econometric models for two sub-samplings: during pre-crisis and post-crisis periods), we found out that it is economy during crisis periods. We believe it is necessary to develop the Taylor Rule, which the Bank of Central Bank of Uzbekistan can use in inflation targeting based on crisis situations.

Key words

Taylor’s model; monetary policy; inflation targeting.

JEL Codes: C36, D84, E31, E52


Aizenman, J., Hutchison M. Inflation Targeting and Real Exchange Rates in Emerging Markets. World Development, Elsevier, 2010, vol. 39, pp. 712–724.
Aoki, K. On the optimal monetary policy response to noisy indicators. Journal of Monetary Economics, 2003, vol. 50, pp. 501–523.
Ball, L. Policy rules for open economies. Working paper, 1998, no. 6760, NBER, Cambridge.
Clarida, R., Gali, J., Gertler, M. Monetary policy rules and macroeconomic stability: Evidence and some theory. Q.J. Econ, 2000, no. 155, pp. 147–180 (and NBER WP 6442).
Cuche Nicolas A. Monetary policy with forwardlooking rules: The Swiss case. Swiss National Bank WP 00.10, Study Center Gerzensee, 2000.
Dabrowski, M., Paczynski, W., Rawdanowicz L. Inflation and monetary policy in Russia: Transition experience and future recommendations. Case Studies and Analyses, 2002, no. 241, Warsaw.
Esanov, A., Merkl, Ch. Monetary Policy Rules for Russia. BOFIT Discussion Papers, 2004, vol. 11.
Evans, C. Real-Time Taylor Rules and the Federal Funds Future Market. Federal Reserve Bank of Chicago. Economic Perspectives, 1998, vol. 2, pp. 44–55.
Fedorova, E.A., Lysenkova, A.V. Kak vliyayut instrumenty denezhno-kreditnoi politiki na dostizhenie tselei TSB RF [How monetary policy tools influence the achievement of objectives of the Central Bank of the Russian Federation]. Voprosy Economiki, 2013, no. 9, pp. 106–118.
Fedorova, E.A., Lysenkova, A.V. Modelirovanie pravila Teilora dlya denezhno-kreditnoi politiki Banka Rossii: empiricheskii analiz [Modeling the Taylor Rule for the monetary policy of the Bank of Russia: an empirical analysis]. Finansy i kredit = Finance and credit, 2013, no. 37, pp. 10–17.
McCallum, B. Alternative monetary policy rules: A comparison with historical settings for the United States, the United Kingdom and Japan. Working Paper, 2000, no. 7725, NBER, Cambridge.
Moiseev, S. Inflyatsionnoe targetirovanie: mezhdunarodnyi opyt i rossiiskie perspektivy [Inflation targeting: international experience and Russian prospects]. Voprosy Economiki, 2000, no. 9, pp. 88–105.
Moiseev, S.R. Pravila denezhno-kreditnoi politiki [Rules of monetary policy]. Finansy i kredit = Finance and credit, 2002, no. 16, pp. 37–46.
Pesonen, H., Korhonen, I. The short and variable lags of Russian monetary policy. Review of Economies in Transition, 1998, no. 4, pp. 59–72.
Plushchevskaya, Yu. O sostoyatel’nosti teoreticheskogo fundamenta targetirovaniya inflyatsii i novokeinsianskikh modelei obshchego ravnovesiya [On validity of the theoretical base of inflation targeting and new-Keynesian general equilibrium models]. Voprosy Economiki, 2012, no. 5, pp. 22–36.
Qin, T., Enders, W. In-sample and out-of-sample properties of linear and nonlinear Taylor rules. Journal of Macroeconomics, 2008, no. 30, pp. 428–443.
Shagas, N.L., Tumanova, E.A. Makroekonomika. Elementy prodvinutogo podkhoda: uchebnik [Macroeconomics. Elements of an advanced approach: a textbook]. Moscow, INFRA-M Publ., 2004, 400 p.
Svensson, L.E.O. Inflation forecast targeting: implementing and monitoring inflation targets. European Economic Review, 1997, no. 41, pp. 1111–1146.
Taylor, J.B. Discretion versus policy rules in practice. Carnegie – Rochester Conference Series on Public Policy, 1993, no. 39, pp. 195–214.
Vdovichenko, A.G., Voronina, V.G. Monetary policy rules and their application in Russia. Research in International Business and Finance, 2006, no. 20, pp. 145–162.
Wolters, M. Estimating monetary policy reaction functions using quantile regressions. Journal of Macroeconomics, 2012, vol. 34, pp. 342–361.
Zheng, T., Wang, X. Estimating forward-looking rules for China’s Monetary Policy: A regime-switching perspective. China Economic Review, 2012, vol. 23, pp. 47–59.

Full Text: PDF (English)