000			01482nab a2200205 4500
008			160416b xxu||||| |||| 00| 0 eng d
100			_aGoyal, Ashima
245			_aStability and Transitions in Emerging Market Policy Rules
260			_a _b _c
300			_a153-172p.
520			_aConditions for stability in an open economy dynamic stochastic general equilibrium model adapted to a dualistic labor market (SOEME) are the same as for a mature economy. But the introduction of monetary policy transmission lags makes it deviate from the Taylor Principle. Under rational expectations a policy rule is unstable, but under adaptive expectations traditional stabilization gives a determinate path, with weights on the objective of less than unity. Estimation of a Taylor rule for India and optimization in the SOEME model itself, all confirm the low weights. The results imply that under rational expectations, optimization is better than following a rule. If backward looking behavior dominates, however, a policy rule can prevent overshooting and instability. Economy-specific rigidities must inform policy design, and the appropriate design will change as the economy develops.
650			_aDSGE
650			_aEmerging Market
650			_aRigidities
650			_aStability
650			_aOptimization
650			_aTaylor Rule
773	0		_039954 _dIndia: Delhi School of Economics, _oS84045 _tIndian Economic Review 49(2) Jul- Dec 2014 _x0019-4670
942			_2ddc _c8
999			_c89151 _d89151