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Meta Taylor Rules for the UK and Australia; Accommodating Regime Uncertainty in Monetary Policy Analysis Using Model Averaging Methods

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  • Kevin Lee
  • Nilss Olekalns
  • Kalvinder Shields

Abstract

This paper provides a characterisation of UK and Australian monetary policy within a Taylor rule framework, accommodating uncertainties about the nature and duration of policy regimes in a flexible but easy-to-implement analysis. Our approach involves estimation and inference based on a set of Taylor rules obtained through linear regression methods, but combined into a ‘meta’ rule using model averaging techniques. Using data that were available in real time, the estimated version of the meta Taylor rule provides a useful and detailed characterisation of monetary policies in the UK and Australia over the last thirty years.
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Suggested Citation

  • Kevin Lee & Nilss Olekalns & Kalvinder Shields, 2013. "Meta Taylor Rules for the UK and Australia; Accommodating Regime Uncertainty in Monetary Policy Analysis Using Model Averaging Methods," Manchester School, University of Manchester, vol. 81, pages 28-53, October.
    • Handle: RePEc:bla:manchs:v:81:y:2013:i::p:28-53
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    Cited by:

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    2. Aristidou, Chrystalleni & Lee, Kevin & Shields, Kalvinder, 2022. "Fundamentals, regimes and exchange rate forecasts: Insights from a meta exchange rate model," Journal of International Money and Finance, Elsevier, vol. 123(C).
    3. Kerry B. Hudson & Joaquin L. Vespignani, 2014. "Understanding the Deviations of the Taylor Rule: A New Methodology with an Application to Australia," CAMA Working Papers 2014-78, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    4. Hudson, Kerry & Vespignani, Joaquin L., 2015. "Understanding the Taylor Rule in Australia," MPRA Paper 104679, University Library of Munich, Germany.
    5. Nguyen Anh D. M. & Pavlidis Efthymios G. & Peel David A., 2018. "Modeling changes in US monetary policy with a time-varying nonlinear Taylor rule," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 22(5), pages 1-17, December.
    6. Phan, Tuan, 2016. "Has Monetary Policy Become More Aggressive, But Less Effective Over Time?," MPRA Paper 107200, University Library of Munich, Germany.
    7. Anh Nguyen & Efthymios Pavlidis & David Alan Peel, 2016. "Modeling changes in U.S. monetary policy," Working Papers 127876159, Lancaster University Management School, Economics Department.
    8. Ying Chen & Hanyang Zhang & Kwok-Leung Tam & Maoguo Wu, 2018. "The Making of Contemporary Australian Monetary Policy - Backward- or Forward- Looking?," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(6), pages 127-140, June.
    9. Fang‐Shuo Chang & Shiu‐Sheng Chen & Po‐Yuan Wang, 2020. "Politics and the UK's monetary policy," Scottish Journal of Political Economy, Scottish Economic Society, vol. 67(5), pages 486-522, November.
    10. Anh Dinh Minh Nguyen, 2017. "U.K. Monetary Policy under Inflation Targeting," Bank of Lithuania Working Paper Series 41, Bank of Lithuania.
    11. Łukasz Goczek & Karol Partyka, 2016. "Reakcja polityki pieniężnej na wydarzenia giełdowe," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 5, pages 27-50.
    12. Alistair Macaulay, 2022. "Heterogeneous Information, Subjective Model Beliefs, and the Time-Varying Transmission of Shocks," CESifo Working Paper Series 9733, CESifo.
    13. Keshab Bhattarai & Matthew Carter, 2018. "An Empirical Analysis of the Taylor Rule and its Application to Monetary Policy: A Case for the United Kingdom and Euro Area," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 5(2), pages 173-182.

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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