The Relation between Monetary Policy Preferences and Unemployment Rates

The aim of this study is to examine the relation between CBRT's monetary policy preferences and unemployment rates for the periods of 1999-2014. We consider Taylor rule as a monetary policy rule and employ Markov regime-switching model to determine the periods of "active" and "passive" monetary policy regimes. After that, we find higher unemployment rates in the periods of active monetary policy regime by using propensity score matching. These findings suggest that the CBRT should conduct monetary policy mix where it is considered not only inflation rates but also output gap to provide economic stability.