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Publication Detailed Description
Measuring monetary policy deviations from the Taylor rule
Journal Title
Economics Letters
Year (definitive publication)
2018
Language
English
Country
United States of America
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Abstract
We estimate deviations of the federal funds rate from the Taylor rule by taking into account the endogeneity of output and inflation to changes in interest rates. We do this by simulating the paths of these variables through a DSGE model using the estimated time series for the exogenous processes except for monetary shocks. We then show that taking the endogeneity of output and inflation into account can make a significant quantitative difference (which can exceed 40 basis points) when calculating the appropriate value of interest rates according to the Taylor rule.
Acknowledgements
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Keywords
Interest rates,New Keynesian models,Sticky prices,DSGE,Business cycles,Bayesian estimation
Fields of Science and Technology Classification
- Economics and Business - Social Sciences
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