Taylor rule or optimal timeless policy? Reconsidering the Fed's behavior since 1982

Minford, Anthony Patrick Leslie ORCID: https://orcid.org/0000-0003-2499-935X and Ou, Zhirong ORCID: https://orcid.org/0000-0002-4610-7183 2013. Taylor rule or optimal timeless policy? Reconsidering the Fed's behavior since 1982. Economic Modelling 32 , pp. 113-123. 10.1016/j.econmod.2013.01.029

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Abstract

We compare three standard New Keynesian models differing only in their representations of monetary policy—the Optimal Timeless Rule, the original Taylor Rule and another with ‘interest rate smoothing’—with the aim of testing which if any can match the data according to the method of indirect inference. We find that the Optimal Timeless Rule performs the best, either with calibrated parameters or with estimated parameters. This model can also account for the widespread finding of apparent ‘Taylor Rules’ and smoothed interest rates in the data, even though neither of these represents the true policy.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Advanced Research Computing @ Cardiff (ARCCA) Business (Including Economics)
Subjects:	H Social Sciences > HC Economic History and Conditions
Uncontrolled Keywords:	Optimal Timeless Rule; Taylor Rules; Indirect inference; Wald statistic.
Publisher:	Elsevier
ISSN:	0264-9993
Last Modified:	01 Mar 2023 12:23
URI:	https://orca.cardiff.ac.uk/id/eprint/61645

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