Time-Varying Coefficients in a GMM Framework: Estimation of a Forward Looking Taylor Rule for the Federal Reserve

H. Partouche

Working papers from Banque de France

Abstract: This article deals with the estimation of a time-varying coefficients equation with endogenous regressors. A non-parametric approach is proposed, combining the Generalized Method of Moments (GMM) with the smoothing splines litterature as in Hodrick and Prescott (1981). This new method is used to analyze the evolution of a forward-looking Taylor rule for the Federal Reserve (FED) from 1960 until 2006. It suggests that monetary policy accommodated inflation during the 60s and the 70s whereas the chairmanship of P. Volcker was a turning point toward a more aggressive stance on inflation. In addition, monetary policy became more and more countercyclical.

Keywords: Monetary policy rules; Generalized Method of Moments; Time-varying coefficients; Smoothing splines. (search for similar items in EconPapers)
JEL-codes: C14 C32 E5 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:177

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