IDEAS home Printed from
   My bibliography  Save this article

Estimation of alternative monetary policy rules and their comparison


  • Hana Pytelová
  • Osvald Vašíček


The article shows the optimal monetary policy problem in three different cases. The first is optimization "under discretion". This means that a central bank can reoptimize its behaviour each period and is not history dependent. The second approach is optimization "under commitment" which means that a central bank makes a binding commitment and can't change its behaviour as a reaction to shocks. The last case is a simple Taylor rule which is not a result of optimization process, but demonstrates real behaviour of many central banks. The policy design problem is to characterize how the central bank should adjust the interest rate to the current state of the economy. The article shows the theoretical procedure of finding the optimal monetary policy. Further, it examines and illustrates the behaviour of the presented models on the Czech economy data. Model parameters are estimated simultaneously by the "Iterative Extended Kalman Filter Smoother". Impulse responses are tested. Fundamental differences of the three cases are explained and presented graphically. Results are economically interpreted.

Suggested Citation

  • Hana Pytelová & Osvald Vašíček, 2004. "Estimation of alternative monetary policy rules and their comparison," Bulletin of the Czech Econometric Society, The Czech Econometric Society, vol. 11(20).
  • Handle: RePEc:czx:journl:v:11:y:2004:i:20:id:132

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    monetary policy; forward-looking model; discretion; commitment; Taylor rule; Iterative Extended Kalman Filter Smoother; impulse responses;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:czx:journl:v:11:y:2004:i:20:id:132. 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: (Jozef Barunik). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.