Uncertainty And Monetary Policy Rules In The United States
Abstract"This article analyzes the impact of uncertainty about the true state of the economy on monetary policy rules in the United States since the early 1980s. Extending the Taylor rule to allow for this type of uncertainty, we find evidence that the predictions of the theoretical literature on responses to uncertainty are reflected in the behavior of policymakers, suggesting that policymakers are adhering to prescriptions for optimal policy. Our estimates suggest that the effect of uncertainty on interest rates was most marked in 1983, when uncertainty increased interest rates by up to 140 basis points, in 1990-1991, when uncertainty reduced interest rates by up to 80 basis points, and in 1996-2001, when uncertainty reduced interest rates by up to 70 basis points over 5 yr. "("JEL "C51, C52, E52, E58) Copyright (c) 2008 Western Economic Association International.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Economic Inquiry.
Volume (Year): 47 (2009)
Issue (Month): 2 (04)
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Other versions of this item:
- Christopher Martin & Costas Milas, 2005. "Uncertainty and Monetary Policy Rules in the United States," Economics and Finance Discussion Papers 05-22, Economics and Finance Section, School of Social Sciences, Brunel University.
- Christopher Martin & Costas Milas, 2005. "Uncertainty and Monetary Policy Rules in the United States," Keele Economics Research Papers KERP 2005/10, Centre for Economic Research, Keele University.
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
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- Cinzia Alcidi & Alessandro Flamini & Andrea Fracasso, 2011. "Policy Regime Changes, Judgment and Taylor rules in the Greenspan Era," Economica, London School of Economics and Political Science, vol. 78(309), pages 89-107, January.
- Greene, William H. & Gillman, Max & Harris, Mark N. & Spencer, Christopher, 2013.
"The Tempered Ordered Probit (TOP) Model with an Application to Monetary Policy,"
CEI Working Paper Series
2013-04, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
- William H.Greene & Max Gillman & Mark N. Harris & Christopher Spencer, 2013. "The Tempered Ordered Probit (TOP) model with an application to monetary policy," Discussion Paper Series 2013_10, Department of Economics, Loughborough University, revised Sep 2013.
- "Belderbos, Rene & Ikeuchi, Kenta & Fukao, Kyoji & Kim, Young Gak & Kwon, Hyeog Ug, 2013. "Plant Productivity Dynamics and Private and Public R&D Spillovers: Technological, Geographic and Relational Proximity," CEI Working Paper Series 2013-05, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
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