How Does Monetary Policy Change? Evidence on Inflation Targeting Countries

0349666 - ÚTIA 2011 CZ eng V - Výzkumná zpráva
Baxa, Jaromír - Horváth, R. - Vašíček, B.
How Does Monetary Policy Change? Evidence on Inflation Targeting Countries.
Praha: UK FSV – IES, 2010. 55 s. IES Working Papers, 26/2010.
Grant CEP: GA ČR GD402/09/H045
Výzkumný záměr: CEZ:AV0Z10750506
Klíčová slova: Taylor rule * Inflation targeting * time-varying parameter model
Kód oboru RIV: AH - Ekonomie
http://library.utia.cas.cz/separaty/2010/E/baxa-0349666.pdf

We examine the evolution of monetary policy rules in a group of inflation targeting countries (Australia, Canada, New Zealand, Sweden and the United Kingdom), applying a moment-based estimator in a time-varying parameter model with endogenous regressors. Using this novel flexible framework, our main findings are threefold. First, monetary policy rules change gradually, pointing to the importance of applying a time-varying estimation framework. Second, the interest rate smoothing parameter is much lower than typically reported by previous time-invariant estimates of policy rules. External factors matter for all countries, although the importance of the exchange rate diminishes after the adoption of inflation targeting. Third, the response of interest rates to inflation is particularly strong during periods when central bankers want to break a record of high inflation, such as in the UK or Australia at the beginning of the 1980s.
Trvalý link: http://hdl.handle.net/11104/0189842