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The Taylor rule and real-time data - a critical appraisal

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  • Par Osterholm

Abstract

In a number of recent papers, it has been argued that the use of ex post data can distort the picture when trying to analyse monetary policy reaction functions. This paper aims to establish whether the Taylor rule has been a reasonable representation of US monetary policy using both ex post and real-time output gap data. Results show that real-time data generate only minor differences to ex post data and, more interestingly, that the Taylor rule appears to be a questionable tool for evaluation of the Federal Reserve during the investigated samples.

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  • Par Osterholm, 2005. "The Taylor rule and real-time data - a critical appraisal," Applied Economics Letters, Taylor & Francis Journals, vol. 12(11), pages 679-685.
    • Handle: RePEc:taf:apeclt:v:12:y:2005:i:11:p:679-685
    DOI: 10.1080/13504850500181849
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    1. Qin, Ting & Enders, Walter, 2008. "In-sample and out-of-sample properties of linear and nonlinear Taylor rules," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 428-443, March.

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