The Reaction of Reduced-Form Coefficients to Regime Changes: The Case of Interest Rates

Joe Peek and James A. Wilcox

No 1379, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This study investigates whether the apparent intertemporal instability of a particular reduced-form equation (that for interest rates) can be explained by changing government policy parameters, or regimes, and otherwise stable structural parameters. We hypothesize that major fiscal, monetary, and regulatory policy parameter shifts have been important sources of that instability. Direct tests imply that reduced-form coefficients move by statistically significant and economically meaningful amounts in response to policy parameter change. Allowing for this systematic parameter variation produces greater stability in the remaining parameters. Furthermore, in-sample and out-of-sample forecasts from the proposed model out perform those from the non-responsive parameter specification.

Date: 1984-06
Note: ME
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w1379.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:1379

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w1379

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().