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Shock matters for estimating monetary policy rules

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  • Shirota, Toyoichiro

Abstract

This study proposes a simple methodology to conditionally estimate monetary-policy rule parameters for underlying structural shocks. The results are summarized as follows. First, the Federal Reserve (Fed) chooses different responses to different types of shocks. Second, the long-run response of policy rates to inflation does not exceed 1 for some shocks. This result suggests that the Fed does not meet the Taylor principle for some shocks.

Suggested Citation

  • Shirota, Toyoichiro, 2019. "Shock matters for estimating monetary policy rules," Economics Letters, Elsevier, vol. 181(C), pages 54-56.
    • Handle: RePEc:eee:ecolet:v:181:y:2019:i:c:p:54-56
    DOI: 10.1016/j.econlet.2019.04.031
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    References listed on IDEAS

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    More about this item

    Keywords

    Monetary policy; Structural shocks; Policy rule;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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