Taylor rule cross-checking and selective monetary policy adjustment

Markus Roth () and Dirk Bursian

VfS Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century from Verein für Socialpolitik / German Economic Association

Abstract: The Taylor rule is a widely used concept in monetary macroeconomics and has been used in various areas either for positive or normative analyses. We examine whether the robustifying nature of Taylor rule cross-checking in the spirit of R island and Sveen (2011) also carries over to the case of parameter uncertainty. We find that adjusting monetary policy based on this kind of cross-checking can on average improve the outcome for the monetary authority in selected specifications. This, however, strongly depends on the functional form and also on the degree of the parameter misspecification as well as the information set of the monetary authority. In those specifications, increasing the relative weight attached to Taylor rule cross-checking results in a trade-off as higher average gains in terms of a reduction of loss are accompanied by higher standard deviations of the relative losses.

JEL-codes: E47 E52 E58 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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https://www.econstor.eu/bitstream/10419/62078/1/VfS_2012_pid_697.pdf (application/pdf)

Related works:
Journal Article: Optimal policy and Taylor rule cross-checking under parameter uncertainty (2014)
Working Paper: Optimal policy and taylor rule cross-checking under parameter uncertainty (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc12:62078

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