Using Taylor Rule to Explain Effects of Institutional Changes in Central Banks

Aleksandra Masłowska-Jokinen

No 46, Discussion Papers from Aboa Centre for Economics

Abstract: In this paper we trace changes in monetary policy caused by institutional amendments in legal acts of central banks. We estimate coefficients of the Taylor Rule for central banks of Sweden, United Kingdom, Switzerland and EU15 to shed some light on monetary policy ex ante and ex post significant improvements in central bank independence. Results presented suggest differences in accommodating monetary policy in countries and support the idea that initial level of CBI matters for reactions to variability both of inflation and output gap. A preindependence period characterizes with strong inflation targeting features, whereas a post-independence time resembles more discretionary type of monetary policy. As a spin-off from our original idea, we find that changing properties of inflation in the last decade make econometric analysis more difficult

Keywords: Taylor rule; central bank independence; interest rate rules (search for similar items in EconPapers)
JEL-codes: E02 E52 (search for similar items in EconPapers)
Pages: 23
Date: 2009-03
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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