Taylor Rule or optimal timeless policy? Reconsidering the Fed's behavior since 1982

A. Patrick Minford and Zhirong Ou

Economic Modelling, 2013, vol. 32, issue C, 113-123

Abstract: We compare three standard New Keynesian models differing only in their representations of monetary policy—the Optimal Timeless Rule, the original Taylor Rule and another with ‘interest rate smoothing’—with the aim of testing which if any can match the data according to the method of indirect inference. We find that the Optimal Timeless Rule performs the best, either with calibrated parameters or with estimated parameters. This model can also account for the widespread finding of apparent ‘Taylor Rules’ and smoothed interest rates in the data, even though neither of these represents the true policy.

Keywords: Identification; Monetary policy; Optimal Timeless Rule; Taylor Rules; Indirect inference; Wald statistic (search for similar items in EconPapers)
JEL-codes: E42 E52 E58 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: Taylor Rule or Optimal Timeless Policy? Reconsidering the Fed's behaviour since 1982 (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:32:y:2013:i:c:p:113-123

DOI: 10.1016/j.econmod.2013.01.029

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