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The Japanese Taylor rule estimated using censored quantile regressions

Author

Listed:
  • Jau-er Chen

    () (National Taiwan University
    Massachusetts Institute of Technology)

  • Masanori Kashiwagi

    () (Gakushuin University)

Abstract

Abstract This paper conducts quantile regressions and obtains detailed estimates of monetary policy rules in Japan using a sample that includes recent periods of zero interest rates. Taking into account censoring and endogeneity, we compute censored quantile instrumental variable estimators and compare them with estimates from uncensored quantile regressions. The estimation results indicate that not accounting for censoring of interest rates tends to result in downwardly biased estimates. Moreover, our censored quantile regressions lead to relatively flat coefficients of inflation and insignificant coefficients of the output gap over the conditional interest rate distribution, suggesting that monetary policy in Japan may be well described by a linear rule.

Suggested Citation

  • Jau-er Chen & Masanori Kashiwagi, 2017. "The Japanese Taylor rule estimated using censored quantile regressions," Empirical Economics, Springer, vol. 52(1), pages 357-371, February.
  • Handle: RePEc:spr:empeco:v:52:y:2017:i:1:d:10.1007_s00181-016-1074-8
    DOI: 10.1007/s00181-016-1074-8
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Quantile regression; Censoring; Japan; Taylor rule; Zero lower bound;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • 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

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