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Estimating the Taylor Rule in the Time-Frequency Domain

Author

Listed:
  • Luís Aguiar-Conraria

    () (NIPE and Department of Economics, University of Minho)

  • Manuel M. F. Martins

    () (cef.up and Faculty of Economics, University of Porto)

  • Maria Joana Soares

    () (NIPE and Department of Mathematics and Applications, University of Minho)

Abstract

We assess U.S. monetary policy across time and frequencies in the framework of the Taylor Rule (TR). With that purpose, we derive a multivariate generalization of the wavelet gain ? the partial wavelet gain ? a new tool which allows us, for the ?rst time, to estimate the TR coe¢ cients in the time-frequency domain. By using this and other continuous wavelet tools, we reach a number of results regarding the evolution of the TR coe¢ cients along time that also have a frequency-domain nature ? for example, the in?ation coe¢ cient has violated the Taylor principle unevenly across frequencies, and the evidence of a modi?ed TR with a unit slope on output since 2009 is also uneven along time and across frequencies.

Suggested Citation

  • Luís Aguiar-Conraria & Manuel M. F. Martins & Maria Joana Soares, 2016. "Estimating the Taylor Rule in the Time-Frequency Domain," CEF.UP Working Papers 1404, Universidade do Porto, Faculdade de Economia do Porto.
  • Handle: RePEc:por:cetedp:1404
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    References listed on IDEAS

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    More about this item

    Keywords

    Monetary Policy; Taylor Rule; Partial Wavelet Gain; Time-Frequency Estimation; Continuous Wavelet Transform.;

    JEL classification:

    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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