Estimating the Taylor Rule in the Time-Frequency Domain

Luís Aguiar-Conraria (), Manuel Martins and Maria Joana Soares ()
Additional contact information
Maria Joana Soares: NIPE and Department of Mathematics and Applications, University of Minho,

No 04/2018, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: We present the first assessment of U.S. monetary policy across time and frequencies within the Taylor Rule framework. We derive a novel wavelet tool - the partial wavelet gain - to estimate a parametric equation relating the federal funds rate to inflation and the output gap. We detect a gradual shift of the focus of policy from short cycles to intermediate cycles at the beginning of the Great Moderation, followed by a strengthening of policy´s reaction to long fluctuations once credibility was attained, and, during the Great Recession, a renewed interest in shorter output cycles. We document that the violation of the Taylor principle until the early 1980s and the strengthening of the reaction of policy to inflation thereafter were more marked at intermediate than at long cycles. Overall, we also detect lead-lag relationships between the policy rate and ináation and the output gap that differ along time and cyclical frequencies.

Keywords: Monetary Policy; Taylor Rule; Partial Wavelet Gain; Time-Frequency Estimation; Continuous Wavelet Transform. (search for similar items in EconPapers)
JEL-codes: C49 E43 E52 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (40)

Downloads: (external link)
http://www.nipe.eeg.uminho.pt/Uploads/WP_2018/NIPE_WP_04_2018.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.nipe.eeg.uminho.pt/Uploads/WP_2018/NIPE_WP_04_2018.pdf [301 Moved Permanently]--> https://nipe.eeg.uminho.pt/Uploads/WP_2018/NIPE_WP_04_2018.pdf)

Related works:
Journal Article: Estimating the Taylor rule in the time-frequency domain (2018)
Working Paper: Estimating the Taylor Rule in the Time-Frequency Domain (2016)
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:nip:nipewp:04/2018

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in NIPE Working Papers from NIPE - Universidade do Minho Núcleo de Investigação em Políticas Económicas e Empresariais, Escola de Economia e Gestão, Universidade do Minho, P-4710-057 Braga, Portugal. Contact information at EDIRC.
Bibliographic data for series maintained by NIPE ().