Monetary Regime Switches and Central Bank Preferences

Davide Debortoli and Ricardo Nunes

Journal of Money, Credit and Banking, 2014, vol. 46, issue 8, 1591-1626

Abstract: Monetary policy objectives and targets are not necessarily constant over time. The regime‐switching literature has typically analyzed and interpreted changes in policymakers' behavior through simple interest rate rules. This paper analyzes policy regime switches by explicitly modeling policymakers' behavior and objectives. We show that changes in the parameters of simple rules do not necessarily correspond to changes in policymakers' preferences. In fact, capturing and interpreting regime changes in preferences through interest rate rules can lead to misleading results.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:46:y:2014:i:8:p:1591-1626

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