Taylor Rules and the Euro

Tanya Molodtsova, Alex Nikolsko‐rzhevskyy and David Papell
Authors registered in the RePEc Author Service: Alex Nikolsko-Rzhevskyy

Journal of Money, Credit and Banking, 2011, vol. 43, issue 2‐3, 535-552

Abstract: This article uses real‐time data to show that inflation and either the output gap or unemployment, variables which normally enter central banks’ Taylor rules, can provide evidence of out‐of‐sample predictability for the U.S. dollar/euro exchange rate from 1999 to 2007. The strongest evidence is found for specifications that constrain the coefficients on inflation and real economic activity to be the same for the United States and the Euro Area, do not incorporate interest rate smoothing, and do not include the real exchange rate in the forecasting regression. Evidence of predictability is found with both one‐quarter‐ahead and longer‐horizon forecasts.

Date: 2011
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Citations: View citations in EconPapers (5)

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https://doi.org/10.1111/j.1538-4616.2011.00384.x

Related works:
Journal Article: Taylor Rules and the Euro (2011)
Working Paper: Taylor Rules and the Euro (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:43:y:2011:i:2-3:p:535-552

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