EconPapers    
Economics at your fingertips  
 

Choosing a Taylor Rule with Limited Data Availability: The Benchmark Approach

Anton Grui (), Jeffrey Liebman (), Sergiy Nikolaychuk and Alex Nikolsko-Rzhevskyy ()
Additional contact information
Anton Grui: National Bank of Ukraine
Jeffrey Liebman: Lehigh College of Business
Sergiy Nikolaychuk: National Bank of Ukraine
Alex Nikolsko-Rzhevskyy: Lehigh College of Business

No 03/2022, Working Papers from National Bank of Ukraine

Abstract: In this paper, authors propose and test a new methodology that aims to select the best performing monetary policy rule when macroeconomic data are very limited, as is often the case for developing countries. The methodology is based on calculating economic losses during the periods when a country implicitly followed an assumed rule and when its central bank exercised discretion. For countries with short data spans where such analysis is not possible, authors propose adopting the rules that historically worked well for their peers. As an intermediate step, authors develop a novel approach to the calculation of the equilibrium real interest rate for developing countries that accounts for their substantial risk premia and the expected real appreciation of the domestic currency. The methodology is then applied to Czechia, Hungary, Poland, and Ukraine to construct the optimal policy rate path and contrast it with the actual one.

Keywords: Taylor rules; monetary policy; real-time data; discretion (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2022-03
New Economics Papers: this item is included in nep-cba, nep-mon and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://bank.gov.ua/admin_uploads/article/WP_2022- ... ko-Rzhevskyy_eng.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:ukb:wpaper:03/2022

Access Statistics for this paper

More papers in Working Papers from National Bank of Ukraine Contact information at EDIRC.
Bibliographic data for series maintained by Research Unit ().

 
Page updated 2023-09-24
Handle: RePEc:ukb:wpaper:03/2022