The Observational Equivalence of Taylor Rule and Taylor-type Rules

Naveen Srinivasan, A. Patrick Minford and Francesco Perugini

No 167, Royal Economic Society Annual Conference 2002 from Royal Economic Society

Abstract: In a variety of recent papers, researchers have found that interest rate behaviour approximately follows a Taylor rule. From this they have concluded that the central bank is following a Taylor rule as its monetary policy reaction function. We show that such interest rate behaviour results when the central bank may be following quite different monetary policy rules from the one proposed by Taylor. In other words an interest rate relation with output and inflation does not identify a central bank reaction function.

Date: 2002-08-29
New Economics Papers: this item is included in nep-fin and nep-mon
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Working Paper: The Observational Equivalence of Taylor Rule and Taylor-Type Rules (2001)
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