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Risk management-driven policy rate gap

Giovanni Caggiano (), Efrem Castelnuovo () and Gabriela Nodari ()

Economics Letters, 2018, vol. 171, issue C, 235-238

Abstract: We employ real-time data available to the US monetary policy makers to estimate a Taylor rule augmented with a measure of financial uncertainty over the period 1969–2008. We find evidence in favor of a systematic response to financial uncertainty over and above that to expected inflation, output gap, and output growth. However, this evidence regards the Greenspan–Bernanke period only. Focusing on this period, the ”risk-management” approach is found to be responsible for monetary policy easings for up to 75 basis points of the federal funds rate.

Keywords: Risk management-driven policy rate gap; Uncertainty; Monetary policy; Taylor rules; Real-time data (search for similar items in EconPapers)
JEL-codes: C2 E4 E5 (search for similar items in EconPapers)
Date: 2018
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Related works:
Working Paper: Risk Management-Driven Policy Rate Gap (2018) Downloads
Working Paper: Risk management-driven policy rate gap (2018) Downloads
Working Paper: Risk Management-Driven Policy Rate Gap (2018) Downloads
Working Paper: Risk Management-Driven Policy Rate Gap (2018) Downloads
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