IDEAS home Printed from https://ideas.repec.org/p/sce/scecf4/121.html
   My bibliography  Save this paper

The Inflation Aversion of the Bundesbank: A State Space Approach

Author

Listed:
  • Vladimir Kuzin

Abstract

A simple backward-looking Taylor rule is estimated in a time-varying coefficient framework with quarterly German data for the period 1975-1998. Markov switching models and the Kalman Filter are used to extract the unobservable paths of the coefficients. The main finding is that the inflation aversion of the Bundesbank was not constant over time and exhibits some sudden and large shifts during the period of monetary targeting. There are phases with low and with high inflation aversion. This could for example explain why the estimated value of the inflation coefficient in backward-looking Taylor rules often does not exceed one and so violates the implications of theoretical monetary policy models. Moreover, the results provide evidence that the Bundesbank followed the so-called "opportunistic approach" to disinflation

Suggested Citation

  • Vladimir Kuzin, 2004. "The Inflation Aversion of the Bundesbank: A State Space Approach," Computing in Economics and Finance 2004 121, Society for Computational Economics.
  • Handle: RePEc:sce:scecf4:121
    as

    Download full text from publisher

    File URL: http://repec.org/sce2004/up.1134.1077722286.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
    2. Cukierman, A., 1999. "The Inflation Bias Result Revisited," Papers 38-99, Tel Aviv.
    3. Richard H. Clarida & Mark Gertler, 1997. "How the Bundesbank Conducts Monetary Policy," NBER Chapters,in: Reducing Inflation: Motivation and Strategy, pages 363-412 National Bureau of Economic Research, Inc.
    4. Gabriel Rodriguez, 2001. "Estimation of the Taylor Rule for Canada Under Multiple Structural Changes," Working Papers 0107E, University of Ottawa, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Taylor rule; state space models; Markov switching models; Kalman Filter;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sce:scecf4:121. 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: (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/sceeeea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.