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Dissecting Taylor rules in a structural VAR

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  • Woon Gyu Choi
  • Yi Wen

Abstract

This paper uncovers Taylor rules from estimated monetary policy reactions using a structural VAR on U.S. data from 1959 to 2009. These Taylor rules reveal the dynamic nature of policy responses to different structural shocks. We find that U.S. monetary policy has been far more responsive over time to demand shocks than to supply shocks, and more aggressive toward inflation than output growth. Our estimated dynamic policy coefficients characterize the style of policy as a "bang-bang" control for the pre-1979 period and as a gradual control for the post 1979 period.

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Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2010-005.

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Date of creation: 2010
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Handle: RePEc:fip:fedlwp:2010-005

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Keywords: Taylor's rule ; Monetary policy;

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References

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Cited by:
  1. Hohberger, Stefan & Herz, Bernhard, 2012. "Fiscal Policy, Monetary Regimes and Current Account Dynamics," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 66054, Verein für Socialpolitik / German Economic Association.

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