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Estimating the Taylor Rule in the Time-Frequency Domain

Listed author(s):
  • 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)

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.

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Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series CEF.UP Working Papers with number 1404.

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Length: 40 pages
Date of creation: Apr 2016
Handle: RePEc:por:cetedp:1404
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