The performance and robustness of interest-rate rules in models of the euro area

Ramón Adalid, Günter Coenen, Peter McAdam () and Stefano Siviero

No 479, Working Paper Series from European Central Bank

Abstract: In this paper, we examine the performance and robustness of optimised interest-rate rules in four models of the euro area which differ considerably in terms of size, degree of aggregation, relevance of forward-looking behavioural elements and adherence to micro-foundations. Our findings are broadly consistent with results documented for models of the U.S. economy: backward-looking models require relatively more aggressive policies with at most moderate inertia; rules that are optimised for such models tend to perform reasonably well in forward-looking models, while the reverse is not necessarily true; and, hence, the operating characteristics of robust rules (i.e., rules that perform satisfactorily in all models) are heavily weighted towards those required by backward-looking models. JEL Classification: E31, E52, E58, E61

Keywords: euro area; macroeconomic modelling; model uncertainty; monetary policy rules; robustness (search for similar items in EconPapers)
Date: 2005-04
Note: 483719
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Citations: View citations in EconPapers (50)

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Related works:
Journal Article: The Performance and Robustness of Interest-Rate Rules in Models of the Euro Area (2005)
Working Paper: The Performance and Robustness of Interest-Rate Rules in Models of the Euro Area (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2005479

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