Testing for Stabilizing Monetary Policy Rules: How Robust to Alternative Specifications?
A common hypothesis of interest in estimated Taylor rules is whether the Federal Funds rate increases more than one-for-one with inflation; a rule with this characteristic is described as stabilizing. This paper discusses the interaction of this hypothesis with the widespread use of a partial adjustment model, in the context of sub-sample stability and robustness to the assumed exclusion of the long bond rate. Estimated rules display sharply different behavior in the 1980s versus the 1990s, and the degree of inertia -- on which the calculated policy response depends -- rises to implausibly high levels in the 1990s. The rising inertia sharpens the non-linearity of the model, imparting fragility to the stabilization inference. Long bond inclusion mitigates these problems, but alternatives to partial adjustment, with a more flexible approach to autocorrelation, also show promise.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 1 (2001)
Issue (Month): 1 (September)
|Contact details of provider:|| Web page: http://www.degruyter.com|
|Order Information:||Web: http://www.degruyter.com/view/j/bejm|
When requesting a correction, please mention this item's handle: RePEc:bpj:bejmac:v:topics.1:y:2001:i:1:n:3. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.