Stock market and exchange rate information in the Taylor rule: Evidence from OECD countries

Kari Heimonen, Juha Junttila and Samu Kärkkäinen

International Review of Economics & Finance, 2017, vol. 51, issue C, 1-18

Abstract: We analyze the effects of stock market and exchange rate information in a forward-looking Taylor rule for monthly data from 14 OECD countries during the years 1999–2016. Especially the stock market information in the form of dividend but also the currency market information in the form of real exchange rate are revealed to be relevant in Taylor rule for many of the countries examined by helping to strengthen the role of inflation and real economic activity deviations in the policy rule. In many cases the rule also seems to be opportunistic, i.e., the inflation target has been time-varying.

Keywords: Monetary policy; Stock market; Currency market (search for similar items in EconPapers)
JEL-codes: E44 E52 E58 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:51:y:2017:i:c:p:1-18

DOI: 10.1016/j.iref.2017.05.001

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