Template-Type: ReDIF-Paper 1.0
Author-Name: Anh Nguyen
Author-Name-First: Anh
Author-Name-Last: Nguyen
Author-Name: Efthymios Pavlidis
Author-Name-First: Efthymios
Author-Name-Last: Pavlidis
Author-Name: David Alan Peel
Author-Name-First: David Alan
Author-Name-Last: Peel
Title: Modeling changes in U.S. monetary policy
Abstract: The monetary economics literature has highlighted four issues that are important in evaluating U.S. monetary policy since the late 1960s: (i) time variation in policy parameters, (ii) asymmetric preferences, (iii) revisions to economic data, and (iv) heteroskedasticity. This paper, for the first time, estimates a Taylor rule model that addresses these four issues simultaneously. Our findings suggest that U.S. monetary policy has experienced substantial changes in terms of both the response to inflation and to real economic activity, as well as changes in preferences. These changes cannot be captured adequately by a single structural break at the late 1970s, as has been commonly assumed in the literature, and play a non-trivial role in economic performance.
Creation-Date: 2016
File-URL: http://www.lancaster.ac.uk/media/lancaster-university/content-assets/documents/lums/economics/working-papers/LancasterWP2016_011.pdf
File-Format: application/pdf
Number: 127876159
Classification-JEL: C32, E52, E58
Keywords: Real-time data, Asymmetric objective, Stochastic volatility, Time-varying parameter model, Taylor rule, Monetary policy rules, Particle filter
Handle: RePEc:lan:wpaper:127876159