The Performance and Robustness of Interest-Rate Rules in Models of the Euro Area

Ramon Adalid, Günter Coenen, Peter McAdam () and Stefano Siviero

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, we examine the performance and robustness of optimized interest-rate rules in four models of the euro area that differ considerably in terms of size, degree of aggregation, relevance of forward-looking behavioral elements, and adherence to microfoundations. Our findings are broadly consistent with results documented for models of the U.S. economy: backward-looking models require relatively more aggressive policies with, at most, moderate inertia; rules that are optimized for such models tend to perform reasonably well in forward-looking models, while the reverse is not necessarily true; and, hence, the operating characteristics of robust rules (i.e., rules that perform satisfactorily in all models) are heavily weighted towards those required by backward-looking models.

Keywords: macroeconomic modelling; model uncertainty; monetary policy rules; robustness; euro area (search for similar items in EconPapers)
JEL-codes: G0 G00 (search for similar items in EconPapers)
Date: 2005-02-10
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
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Citations: View citations in EconPapers (46)

Published in International Journal of Central Banking Number 1.Volume(2005): pp. 95-132

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Related works:
Journal Article: The Performance and Robustness of Interest-Rate Rules in Models of the Euro Area (2005)
Working Paper: The performance and robustness of interest-rate rules in models of the euro area (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:821

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