IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v50y2018i9p973-989.html
   My bibliography  Save this article

Understanding the deviation of Australian policy rate from the Taylor rule

Author

Listed:
  • Kerry B Hudson
  • Joaquin Vespignani

Abstract

This investigation aims to explain and quantify the deviations of the Australian policy rate (set by Reserve Bank of Australia) from the Taylor Rule. A three-step econometric procedure designed to reflect the data-rich environment in which central banks operate is proposed using information for 229 macroeconomic series. This procedure can be applied to data for any economy with inflation targeting monetary rule. Our application with Australian data shows that approximately 65% of Australia’s policy rate deviation from the Taylor Rule can be explained systematically, with international factors and a domestic factor accounting for 41.9% and 22.5%, respectively, of the total variation in deviation from the rule.

Suggested Citation

  • Kerry B Hudson & Joaquin Vespignani, 2018. "Understanding the deviation of Australian policy rate from the Taylor rule," Applied Economics, Taylor & Francis Journals, vol. 50(9), pages 973-989, February.
  • Handle: RePEc:taf:applec:v:50:y:2018:i:9:p:973-989
    DOI: 10.1080/00036846.2017.1346367
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/00036846.2017.1346367
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gordon de Brouwer & James O'Regan, 1997. "Evaluating Simple Monetary-policy Rules for Australia," RBA Annual Conference Volume (Discontinued),in: Philip Lowe (ed.), Monetary Policy and Inflation Targeting Reserve Bank of Australia.
    2. Gordon de Brouwer, 1998. "Estimating Output Gaps," RBA Research Discussion Papers rdp9809, Reserve Bank of Australia.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Statistics

    Access and download statistics

    Corrections

    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:taf:applec:v:50:y:2018:i:9:p:973-989. 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: (Chris Longhurst). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    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 CitEc recognized a reference but did not link an item in RePEc 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 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.