Does the ECB Rely on a Taylor Rule?: Comparing Ex-post with Real Time Data
Ansgar Belke and
Jens Klose ()
No 917, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research
We assess the differences that emerge in Taylor rule estimations for the ECB when using ex-post data instead of real time forecasts and vice versa. We argue that previous comparative studies in this field mixed up two separate effects. First, the differences resulting from the use of ex-post and real time data per se and, second, the differences emerging from the use of non-modified real time data instead of real-time data based forecasted values and vice versa. Since both effects can influence the reaction to inflation and the output gap either way, we use a more clear-cut approach to disentangle the partial effects. Our estimation results indicate that using real time instead of ex post data leads to higher estimated inflation coefficients while the opposite is true for the output gap coefficients. If real time data forecasts for the current period are used (since actual data become available with a lag), this empirical pattern is even strengthened in the sense of even increasing the inflation response but lowering the reaction to the output gap while the reverse is true if "true" forecasts of real time data for several periods are employed.
Keywords: European Central Bank; monetary policy; real time data; Taylor rule (search for similar items in EconPapers)
JEL-codes: E43 E58 (search for similar items in EconPapers)
Pages: 35 p.
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
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Working Paper: Does the ECB Rely on a Taylor Rule? - Comparing Ex-post with Real Time Data (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:diw:diwwpp:dp917
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