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'Ex-ante' Taylor rules - Newly discovered evidence from the G7 countries

Author

Listed:
  • Ralf Fendel
  • Michael Frenkel
  • Jan-Christoph Rülke

Abstract

This paper addresses the question whether financial market participants apply the framework of Taylor-type rules in their forecasts for the G7 countries. Therefore, we use the Consensus Economic Forecast poll providing us a unique data set of inflation, interest and growth rate forecasts for the time period 1989 - 2007. We provide evidence that Taylor-type rules frameworks are present in forecasts of financial markets. Thus, the paper, uses ex-ante data for the estimation of Taylor rules. This is novel, since so far only ex-post (revised) or real-time data have been applied.

Suggested Citation

  • Ralf Fendel & Michael Frenkel & Jan-Christoph Rülke, 2008. "'Ex-ante' Taylor rules - Newly discovered evidence from the G7 countries," WHU Working Paper Series - Economics Group 08-03, WHU - Otto Beisheim School of Management.
  • Handle: RePEc:whu:wpaper:08-03
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    References listed on IDEAS

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    1. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," The Quarterly Journal of Economics, Oxford University Press, vol. 115(1), pages 147-180.
    2. Berger, Helge & Ehrmann, Michael & Fratzscher, Marcel, 2006. "Forecasting ECB monetary policy: accuracy is (still) a matter of geography," Discussion Papers 2006/11, Free University Berlin, School of Business & Economics.
    3. Michael M. Hutchison & Frank Westermann (ed.), 2006. "Japan's Great Stagnation: Financial and Monetary Policy Lessons for Advanced Economies," MIT Press Books, The MIT Press, edition 1, volume 1, number 9780262083478, January.
    4. Berger, Helge & Ehrmann, Michael & Fratzscher, Marcel, 2006. "Geography or skills: What explains Fed watchers’ forecast accuracy of US monetary policy?," Working Paper Series 695, European Central Bank.
    5. John B. Taylor, 1999. "A Historical Analysis of Monetary Policy Rules," NBER Chapters,in: Monetary Policy Rules, pages 319-348 National Bureau of Economic Research, Inc.
    6. Clarida, Richard & Gali, Jordi & Gertler, Mark, 1998. "Monetary policy rules in practice Some international evidence," European Economic Review, Elsevier, vol. 42(6), pages 1033-1067, June.
    7. Joel T. Krueger & Kenneth N. Kuttner, 1996. "The Fed funds futures rate as a predictor of federal reserve policy," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 16(8), pages 865-879, December.
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    12. Beck, Roland, 2001. "Do country fundamentals explain emerging market bond spreads?," CFS Working Paper Series 2001/02, Center for Financial Studies (CFS).
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    14. Glenn D. Rudebusch, 2006. "Monetary Policy Inertia: Fact or Fiction?," International Journal of Central Banking, International Journal of Central Banking, vol. 2(4), December.
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    More about this item

    Keywords

    Taylor rule; expectation formation; monetary policy;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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