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The Taylor Rule and Interest Rate Uncertainty in the U.S. 1970-2006

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Author Info

  • Martin Mandler

    (University of Giessen)

Abstract

This paper shows how to estimate forecast uncertainty about future short-term interest rates by combining a time-varying Taylor rule with an unobserved components model of economic fundamentals. Using this model I separate interest rate uncertainty into economically meaningful components that represent uncertainty about future economic conditions and uncertainty about future monetary policy. Results from estimating the model on U.S. data suggest important changes in uncertainty about future short-term interest rates over time and highlight the relative importance of the different elements which underlie interest rate uncertainty for the U.S.

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File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/45-2009_mandler.pdf
File Function: First version, 2009
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Bibliographic Info

Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 200945.

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Length: 28 pages
Date of creation: 2009
Date of revision:
Publication status: Forthcoming in
Handle: RePEc:mar:magkse:200945

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Related research

Keywords: Monetary policy; reaction functions; state-space models; output-gap forecasts; inflation forecasts;

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Cited by:
  1. Yüksel, Ebru & Metin-Ozcan, Kivilcim & Hatipoglu, Ozan, 2013. "A survey on time-varying parameter Taylor rule: A model modified with interest rate pass-through," Economic Systems, Elsevier, vol. 37(1), pages 122-134.

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