Policy rate decisions and unbiased parameter estimation in typical monetary policy rules

Jiri Podpiera

No 771, Working Paper Series from European Central Bank

Abstract: Policymakers do not always follow a simple rule for setting policy rates for various reasons and thus their choices are co-driven by a decision to follow a rule or not. Consequently, some observations are censored and cause bias in conventional estimators of typical Taylor rules. To account for the censored and discrete process of policy rate setting, I devise a new method for monetary policy rule estimation and demonstrate its ability to outperform the existing conventional estimators using two examples. JEL Classification: E4, E5

Keywords: bias in parameters; monetary policy; policy rule (search for similar items in EconPapers)
Date: 2007-06
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2007771

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