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Taylor and McCallum Rule during the Unprecedented Monetary Easing Era: The Recent Japanese Case

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Listed:
  • Yutaka Kurihara
  • Akio Fukushima

Abstract

The Taylor and McCallum rules have been examined a lot in many studies. After these frameworks were presented, deflation has been prevailing and market interest rates have been low, almost zero, or negative in the world. Japan is a typical example. Unconventional monetary policy based on monetary base instead of based on interest rates, has been conducting. This study examines whether or not the Taylor and McCallum rule fit well in Japan. The empirical results show that the McCallum rule fits for recent Japanese cases, but the Taylor rule does not.

Suggested Citation

  • Yutaka Kurihara & Akio Fukushima, 2020. "Taylor and McCallum Rule during the Unprecedented Monetary Easing Era: The Recent Japanese Case," Applied Economics and Finance, Redfame publishing, vol. 7(3), pages 70-77, May.
    • Handle: RePEc:rfa:aefjnl:v:7:y:2020:i:3:p:70-77
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    References listed on IDEAS

    as
    1. Damette, Olivier & Parent, Antoine, 2016. "Did the Fed follow an implicit McCallum rule during the Great Depression?," Economic Modelling, Elsevier, vol. 52(PA), pages 226-232.
    2. Bennett T. McCallum, 2005. "Monetary policy and the term structure of interest rates," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 91(Fall), pages 1-21.
    3. Boehm, Christoph E. & House, Christopher L., 2019. "Optimal Taylor rules when targets are uncertain," European Economic Review, Elsevier, vol. 119(C), pages 274-286.
    4. Jung, Alexander, 2018. "Does McCallum’s rule outperform Taylor’s rule during the financial crisis?," The Quarterly Review of Economics and Finance, Elsevier, vol. 69(C), pages 9-21.
    5. Yutaka Kurihara, 2017. "Taylor Rule During the Zero or Low Interest Rate Era: The Recent Japanese Case," Applied Economics and Finance, Redfame publishing, vol. 4(1), pages 1-8, January.
    6. C. A. Nebot & J. Garcia-Solanes & A. Beyaert, 2019. "New insights into the non-linearity of the ECB Taylor Rule," Applied Economics Letters, Taylor & Francis Journals, vol. 26(12), pages 1044-1048, July.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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