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Augmenting the Taylor rule: Monetary policy and the bond market

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  • Roskelley, Kenneth D.

Abstract

I show that augmenting the Taylor rule with bond yields observed at the start of the quarter significantly improves the in-sample and out-of-sample fit. Moreover, the augmented rule produces lower forecast errors than those of linear and non-linear policy models.

Suggested Citation

  • Roskelley, Kenneth D., 2016. "Augmenting the Taylor rule: Monetary policy and the bond market," Economics Letters, Elsevier, vol. 144(C), pages 64-67.
    • Handle: RePEc:eee:ecolet:v:144:y:2016:i:c:p:64-67
    DOI: 10.1016/j.econlet.2016.05.002
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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