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Estimated Taylor Rules updated for the post-crisis period

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The Taylor Rule is often used to describe simply how central banks adjust short-term interest rates in response to economic conditions. We use this approach to analyse monetary policy in New Zealand, Australia, and the United States since the early 1990s. We find that the response of monetary policy to changing economic conditions is similar in New Zealand and Australia. Robust results could not be found for the United States, and in recent years it has become even more difficult to do so as the Federal Reserve has been constrained by the zero lower bound on nominal interest rates.

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Paper provided by Reserve Bank of New Zealand in its series Reserve Bank of New Zealand Analytical Notes series with number AN2013/04.

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Length: 23 p.
Date of creation: Apr 2013
Date of revision:
Handle: RePEc:nzb:nzbans:2013/04
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  1. Thomas Lubik & Frank Schorfheide, 2003. "Do Central Banks Respond to Exchange Rate Movements? A Structural Investigation," Economics Working Paper Archive 505, The Johns Hopkins University,Department of Economics.
  2. Jean-Stephane Mesonnier & Jean-Paul Renne, 2004. "A Time Varying Natural Rate of Interest for the Euro Area," Money Macro and Finance (MMF) Research Group Conference 2004 42, Money Macro and Finance Research Group.
  3. Angela Huang & Dimitri Margaritis & David Mayes, 2001. "Monetary Policy Rules in Practice: Evidence from New Zealand," Multinational Finance Journal, Multinational Finance Journal, vol. 5(3), pages 175-200, September.
  4. Nils Björksten & Özer Karagedikli & Christopher Plantier & Arthur Grimes, 2004. "What Does the Taylor Rule Say About a New Zealand-Australia Currency Union?," The Economic Record, The Economic Society of Australia, vol. 80(s1), pages S34-S42, 09.
  5. Orphanides, Athanasios, 2003. "Historical monetary policy analysis and the Taylor rule," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 983-1022, July.
  6. David Archer & Andy Brookes & Michael Reddell, 1999. "A cash rate system for implementing monetary policy," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 62, March.
  7. Michael Kirker, 2008. "Does natural rate variation matter? Evidence from New Zealand," Reserve Bank of New Zealand Discussion Paper Series DP2008/17, Reserve Bank of New Zealand.
  8. Timothy Kam & Kirdan Lees & Philip Liu, 2006. "Uncovering The Hit-List For Small Inflation Targeters: A Bayesian Structural Analysis," ANU Working Papers in Economics and Econometrics 2006-473, Australian National University, College of Business and Economics, School of Economics.
  9. John B. Taylor, 2009. "The Financial Crisis and the Policy Responses: An Empirical Analysis of What Went Wrong," NBER Working Papers 14631, National Bureau of Economic Research, Inc.
  10. Colin Gray, 2013. "Responding to a Monetary Superpower: Investigating the Behavioral Spillovers of U.S. Monetary Policy," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 41(2), pages 173-184, June.
  11. John B. Taylor, 2001. "The Role of the Exchange Rate in Monetary-Policy Rules," American Economic Review, American Economic Association, vol. 91(2), pages 263-267, May.
  12. Guthrie, Graeme & Wright, Julian, 2000. "Open mouth operations," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 489-516, October.
  13. Andrew K. Rose, 2006. "A Stable International Monetary System Emerges: Inflation Targeting is Bretton Woods, Reversed," NBER Working Papers 12711, National Bureau of Economic Research, Inc.
  14. Boris Hofmann & Bilyana Bogdanova, 2012. "Taylor rules and monetary policy: a global "Great Deviation"?," BIS Quarterly Review, Bank for International Settlements, September.
  15. Peersman, Gert & Smets, Frank, 1999. "The Taylor Rule: A Useful Monetary Policy Benchmark for the Euro Area?," International Finance, Wiley Blackwell, vol. 2(1), pages 85-116, April.
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