Is the Taylor rule really different from the McCallum rule?

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Is the Taylor rule really different from the McCallum rule?

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W A Razzak (Reserve Bank of New Zealand)

Additional information is available for the following registered author(s):

Weshah A Razzak

Abstract

When base velocity is a stable function of the Federal funds rate (FFR), the money base-nominal GDP targeting rule (McCallum rule) can be re-parameterised and presented in terms of FFR as the policy instrument. Comparison of this McCallum modified policy rule with the popular Taylor rule suggests that these two rules and the FFR are actually cointegrated. Model-based evaluations of the two rules' stabilisation properties indicate that the modified McCallum rule is similar to the Taylor rule. The key to this result is the degree of interest rate smoothing applied to the policy rules.

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Paper provided by Reserve Bank of New Zealand in its series Reserve Bank of New Zealand Discussion Paper Series with number DP2001/07.

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Length: 29p
Date of creation: Oct 2001
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Handle: RePEc:nzb:nzbdps:2001/07

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Article
- W. A. Razzak, 2003. "Is the Taylor Rule Really Different from the McCallum Rule?," Contemporary Economic Policy, Oxford University Press, vol. 21(4), pages 445-457, October.

Find related papers by JEL classification:
E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
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

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Orphanides, Athanasios, 1999. "The Quest for Prosperity Without Inflation," Working Paper Series 93, Sveriges Riksbank (Central Bank of Sweden). [Downloadable!]
Other versions:
- Athanasios Orphanides, 2000. "The quest for prosperity without inflation," Working Paper Series 15, European Central Bank. [Downloadable!]
- Orphanides, Athanasios, 2003. "The quest for prosperity without inflation," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 633-663, April. [Downloadable!] (restricted)
Richard Dennis, 2006. "The policy preferences of the US Federal Reserve," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(1), pages 55-77. [Downloadable!]
Other versions:
- Richard Dennis, 2001. "The policy preferences of the U.S. Federal Reserve," Working Papers in Applied Economic Theory 2001-08, Federal Reserve Bank of San Francisco. [Downloadable!]
Arturo Estrella & Jeffrey C. Fuhrer, 2002. "Dynamic Inconsistencies: Counterfactual Implications of a Class of Rational-Expectations Models," American Economic Review, American Economic Association, vol. 92(4), pages 1013-1028, September. [Downloadable!]
Other versions:
- Arturo Extrella & Jeffrey C. Fuhrer, 1998. "Dynamic inconsistencies: counterfactual implications of a class of rational expectations models," Working Papers 98-5, Federal Reserve Bank of Boston. [Downloadable!]
Laurence H. Meyer, 2001. "Does money matter?," Review, Federal Reserve Bank of St. Louis, issue May, pages 1-16. [Downloadable!]

Full references

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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Athanasios Orphanides, 2003. "Historical monetary policy analysis and the Taylor rule," Finance and Economics Discussion Series 2003-36, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
Other versions:
- Orphanides, Athanasios, 2003. "Historical monetary policy analysis and the Taylor rule," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 983-1022, July. [Downloadable!] (restricted)

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