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Dissecting Taylor rules in a structural VAR

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  • Woon Gyu Choi
  • Yi Wen

Abstract

This paper uncovers Taylor rules from estimated monetary policy reactions using a structural VAR on U.S. data from 1959 to 2009. These Taylor rules reveal the dynamic nature of policy responses to different structural shocks. We find that U.S. monetary policy has been far more responsive over time to demand shocks than to supply shocks, and more aggressive toward inflation than output growth. Our estimated dynamic policy coefficients characterize the style of policy as a "bang-bang" control for the pre-1979 period and as a gradual control for the post 1979 period.

Suggested Citation

  • Woon Gyu Choi & Yi Wen, 2010. "Dissecting Taylor rules in a structural VAR," Working Papers 2010-005, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:2010-005
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    Cited by:

    1. Bernhard Herz & Stefan Hohberger, 2013. "Fiscal Policy, Monetary Regimes and Current Account Dynamics," Review of International Economics, Wiley Blackwell, vol. 21(1), pages 118-136, February.
    2. Tae Bong Kim & Hangyu Lee, 2015. "Macroeconomic Shocks and Dynamics of Labor Markets in Korea," Working Papers 2015-26, Economic Research Institute, Bank of Korea.

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    Keywords

    Taylor's rule ; Monetary policy;

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