Should a central bank accommodate energy price shocks? Should the central bank use core inflation or headline inflation with the volatile energy component in its Taylor rule? To answer these questions, we build a dynamic stochastic general equilibrium model with energy use, durable goods, and...

This paper examines the impact of different types of oil price shocks on the U.S. economy, using a factor-augmented VAR (FAVAR) approach. The results indicate that when examining the effects of oil price shocks, it is important to account for the interaction between the oil market and the...

Traditional Taylor rules, which are estimated using a level specification linking the short-term interest rate to inflation and the output gap, are unstable when estimated on euro area data and forecast poorly out of sample. We present an alternative reaction function which takes the...

There is widespread agreement that monetary policy should be evaluated by using forward-looking Taylor rules estimated with real-time data. For the case of the U.S., this analysis can be performed using Greenbook data, but only through 2002. In countries outside the U.S., central banks do not...

The standard new Keynesian monetary policy problem is, in its original presentation, a linear model. As a result, only three possibilities are admissible in terms of long term dynamics: the equilibrium may be a stable node, an unstable node or a saddle point. Fixed point stability (a stable...

This paper develops a heterogeneous agents segmented markets model with endogenous production and a monetary authority that follows a Taylor-type interest rate rule. The model is estimated using Markov chain Monte Carlo techniques and is evaluated as a framework suitable for empirical monetary...

This article reconstructs the history of monetary policy of the central bank of Colombia inthe period 1990 to 2010 in which explicit ination targeting was adopted by October of 2000.To do so we developed theoretically a modi…ed Taylor rule with interest rate smoothing foran open and small...

This paper examines whether government ideology has influenced monetary policy in OECD countries. We use quarterly data in the 1980.1–2005.4 period and exclude EMU countries. Our Taylor-rule specification focuses on the interactions of a new time-variant index of central bank independence with...

This paper investigates the econometric properties of the Taylor (1993) rule applied to U.S., Australian and Swedish data to judge its empirical relevance. Little attention has been paid to the time series properties of the data underlying interest rate rules, nor the estimations themselves,...

In this paper, using an econometric model (the model with Markov switchings), monetary policy of the Russian Federation in 2001—2011 is studied, based on the Taylor rule. CBR’s policy priorities in relation to inflation and the exchange rate in the given period are identified. Monetary tools...