The Taylor rule and house price uncertainty

Bruce Morley and Qijia Wei

Applied Economics Letters, 2012, vol. 19, issue 15, 1449-1453

Abstract: The aim of this article is to determine whether house price uncertainty has been an important determinant of the Taylor rule-based interest rate during the years leading up to the financial crisis. A Generalized Autoregressive Conditional Heteroskedasticity (GARCH)-based specification has been used to produce a time-varying measure of volatility, and the results indicate that it has had a significant negative effect on the interest rate, but that its addition only produces a slightly better fit to the actual interest rate.

Date: 2012
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DOI: 10.1080/13504851.2011.633882

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