Empirical Evidence on the Generalized Taylor Principle
During financial crises central banks usually decrease interest rates in order to reduce financial uncertainty. This behavior increases inflation risk. The trade-off between inflation and uncertainty stabilization can be modeled by the generalized Taylor rule, which describes inflation sensitivity as a function of financial uncertainty instead of a constant parameter. Based on the GMM-estimation of the generalized approach I confirm the suggested uncertainty-dependent inflation sensitivity of the Fed. Prolonged deviations from the Taylor principle are not evident. This implies that the Fed does not deemphasize inflation stabilization in favor of uncertainty stabilization – especially during the peak of the latest sub-prime crisis.
|Date of creation:||Apr 2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.rwi-essen.de/
More information through EDIRC
|Order Information:||Web: http://www.rwi-essen.de/publikationen/|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ruge-Murcia, Francisco J, 1995. "Credibility and Changes in Policy Regime," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 176-208, February.
- Eric M. Leeper & Tao Zha, 2003.
"Modest policy interventions,"
FRB Atlanta Working Paper
2003-24, Federal Reserve Bank of Atlanta.
- Eric M. Leeper & Tao Zha, 1999. "Modest policy interventions," FRB Atlanta Working Paper 99-22, Federal Reserve Bank of Atlanta.
- Eric M. Leeper & Tao Zha, 2002. "Modest policy interventions," FRB Atlanta Working Paper 2002-19, Federal Reserve Bank of Atlanta.
- Eric M. Leeper & Tao Zha, 2002. "Modest Policy Interventions," NBER Working Papers 9192, National Bureau of Economic Research, Inc.
- Troy Davig & Eric M. Leeper, 2005.
"Generalizing the Taylor Principle,"
NBER Working Papers
11874, National Bureau of Economic Research, Inc.
- Troy A. Davig & Eric M. Leeper, 2005. "Generalizing the Taylor principle," Research Working Paper RWP 05-13, Federal Reserve Bank of Kansas City.
- Troy Davig & Eric M. Leeper, 2006. "Generalizing the Taylor Principle," Caepr Working Papers 2006-001, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
- Davig, Troy, 2004. "Regime-switching debt and taxation," Journal of Monetary Economics, Elsevier, vol. 51(4), pages 837-859, May.
- David Andolfatto & Paul Gomme, 1997.
"Monetary policy regimes and beliefs,"
Discussion Paper / Institute for Empirical Macroeconomics
118, Federal Reserve Bank of Minneapolis.
- David Andolfatto & Paul Gomme, 2001. "Monetary policy regimes and beliefs," Working Paper 9905, Federal Reserve Bank of Cleveland.
- David Andolfatto & Paul Gomme, 1997. "Monetary Policy Regimes and Beliefs," Cahiers de recherche CREFE / CREFE Working Papers 48, CREFE, Université du Québec à Montréal, revised Apr 2001.
- David Andolfatto & Paul Gomme, 1997. "Monetary Policy Regimes and Beliefs," Working Papers 97002, University of Waterloo, Department of Economics, revised Jan 1997.
- Nicholas Bloom, 2009.
"The Impact of Uncertainty Shocks,"
Econometric Society, vol. 77(3), pages 623-685, 05.
When requesting a correction, please mention this item's handle: RePEc:rwi:repape:0334. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sabine Weiler)
If references are entirely missing, you can add them using this form.