 Do We Need Тaylor-type Rules in DSGE?Sergey Ivashchenko ()
No wps144, Bank of Russia Working Paper Series from Bank of Russia Abstract: The small-scale open economy dynamic stochastic general equilibrium (DSGE) models are estimated with a second-order approximation. The models differ in monetary policy rules. Optimal policy under commitment is best according to marginal likelihood. The conventional Taylor-type rule performs better in short-term forecasting but loses to other policies in long-term forecasting. Monetary policy rules heavily influence the dynamic and estimated parameters of models. They may produce a "price puzzle" and easily lead to the absence of inflation anchoring. The most interesting results relate to the performance of different rules in economies estimated with other rules. Very hawkish policies in a usual economy lead to a non-unique solution. An explosive trajectory is produced by the usual policy in an economy with a fiscal authority that does not care about debts/assets. Only the optimal policy under commitment can work in each of them. However, it may lead to a worse loss function than that produced by simple rules. Keywords: DSGE; monetary policy; estimated optimal policy under commitment (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bkr:wpaper:wps144 Access Statistics for this paper More papers in Bank of Russia Working Paper Series from Bank of Russia Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.