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Meta Taylor Rules for the UK and Australia; Accommodating Regime Uncertainty in Monetary Policy Analysis using Model Averaging Methods

  • Kevin Lee
  • Nilss Olekalns
  • Kalvinder Shields

This paper provides a characterisation of UK and Australian monetary policy within a Taylor rule framework, accommodating uncertainties about the nature and duration of policy regimes in a flexible but easy-to-implement analysis. Our approach involves estimation and inference based on a set of Taylor rules obtained through linear regression methods, but combined into a ‘meta’ rule using model averaging techniques. Using data that were available in real time, the estimated version of the meta Taylor rule provides a useful and detailed characterisation of monetary policies in the UK and Australia over the last thirty years.

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File URL: http://fbe.unimelb.edu.au/__data/assets/pdf_file/0003/784281/1138.pdf
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Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 1138.

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Length: 37 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:mlb:wpaper:1138
Contact details of provider: Postal: Department of Economics, The University of Melbourne, 4th Floor, FBE Building, Level 4, 111 Barry Street. Victoria, 3010, Australia
Phone: +61 3 8344 5355
Fax: +61 3 8344 6899
Web page: http://www.economics.unimelb.edu.au
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  1. Cukierman Alex & Muscatelli Anton, 2008. "Nonlinear Taylor Rules and Asymmetric Preferences in Central Banking: Evidence from the United Kingdom and the United States," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 1-31, February.
  2. Athanasios Orphanides & Simon Van_Norden, 2000. "The Reliability of Output Gap Estimates in Real Time," Econometric Society World Congress 2000 Contributed Papers 0768, Econometric Society.
  3. Anthony Garratt & Kevin Lee & Emi Mise & Kalvinder Shields, 2006. "Real Time Representations of the Output Gap," Birkbeck Working Papers in Economics and Finance 0619, Birkbeck, Department of Economics, Mathematics & Statistics.
  4. Edward Nelson, 2000. "UK monetary policy 1972-97: a guide using Taylor rules," Bank of England working papers 120, Bank of England.
  5. Alexander Mihailov, 2005. "Operational Independence, Inflation Targeting and UK Monetary Policy," Economics Discussion Papers 602, University of Essex, Department of Economics.
  6. Gordon de Brouwer & Luci Ellis, 1998. "Forward-looking Behaviour and Credibility: Some Evidence and Implications for Policy," RBA Research Discussion Papers rdp9803, Reserve Bank of Australia.
  7. Laurence Ball, 1997. "Efficient rules for monetary policy," Reserve Bank of New Zealand Discussion Paper Series G97/3, Reserve Bank of New Zealand.
  8. Cinzia Alcidi & Alessandro Flamini & Andrea Fracasso, 2011. "Policy Regime Changes, Judgment and Taylor rules in the Greenspan Era," Economica, London School of Economics and Political Science, vol. 78(309), pages 89-107, January.
  9. Martin, Christopher & Costas Milas, 2002. "Modelling Monetary Policy: Inflation Targeting in Practice," Royal Economic Society Annual Conference 2002 137, Royal Economic Society.
  10. Garratt, Anthony & Lee, Kevin & Mise, Emi & Shields, Kalvinder, 2009. "Real time representation of the UK output gap in the presence of model uncertainty," International Journal of Forecasting, Elsevier, vol. 25(1), pages 81-102.
  11. GORDON de BROUWER & JAMES GILBERT, 2005. "Monetary Policy Reaction Functions in Australia," The Economic Record, The Economic Society of Australia, vol. 81(253), pages 124-134, 06.
  12. Stemp, Peter J, 1991. "Optimal Weights in a Check-List of Monetary Indicators," The Economic Record, The Economic Society of Australia, vol. 67(196), pages 1-13, March.
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