The Influence of the Taylor rule on US monetary policy

Pelin Ilbas, Øistein Røisland () and Tommy Sveen ()
Additional contact information
Øistein Røisland: Norges Bank
Tommy Sveen: BI Norwegian Business School

No 241, Working Paper Research from National Bank of Belgium

Abstract: We analyze the influence of the Taylor rule on US monetary policy by estimating the policy preferences of the Fed within a DSGE framework. The policy preferences are represented by a standard loss function, extended with a term that represents the degree of reluctance to letting the interest rate deviate from the Taylor rule. The empirical support for the presence of a Taylor rule term in the policy preferences is strong and robust to alternative specifications of the loss function. Analyzing the Fed's monetary policy in the period 2001-2006, we find no support for a decreased weight on the Taylor rule, contrary to what has been argued in the literature. The large deviations from the Taylor rule in this period are due to large, negative demand-side shocks, and represent optimal deviations for a given weight on the Taylor rule.

Keywords: optimal monetary policy; simple rules; central bank preferences (search for similar items in EconPapers)
JEL-codes: E42 E52 E58 E61 E65 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2013-01
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.nbb.be/doc/ts/publications/wp/wp241en.pdf (application/pdf)

Related works:
Working Paper: The influence of the Taylor rule on US monetary policy (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbb:reswpp:201301-241

Access Statistics for this paper

More papers in Working Paper Research from National Bank of Belgium Contact information at EDIRC.
Bibliographic data for series maintained by ().