Interest Rate Persistence and Monetary Policy Rule in the Light of Model Uncertainty

2021 ◽  
Author(s):  
Shou-Yung Yin ◽  
Chang-Ching Lin ◽  
Ming-Jen Chang
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Model Uncertainty ◽  
Policy Rule ◽  
Monetary Policy Rule

Monetary-Policy Rule as a Bridge: Predicting Inflation without Predictive Regressions

2018 ◽  
Vol 53 (6) ◽  
pp. 2559-2586 ◽  
Author(s):  
Jian Hua ◽  
Liuren Wu
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Historical Analysis ◽  
Policy Rule ◽  
Estimation Errors ◽  
Predictive Regressions ◽  
Inflation Rates ◽  
Monetary Policy Rule ◽  
Out Of Sample

A major issue with predicting inflation rates using predictive regressions is that estimation errors can overwhelm the information content. This article proposes a new approach that uses a monetary-policy rule as a bridge between inflation rates and short-term interest rates and relies on the forward-interest-rate curve to predict future interest-rate movements. The 2-step procedure estimates the predictive relation not through a predictive regression but far more accurately through the contemporaneous monetary-policy linkage. Historical analysis shows that the approach outperforms random walk out of sample by 30%–50% over horizons from 1 to 5 years.

scholarly journals The bank lending channel and monetary policy rules for Eurozone banks: further extensions

2015 ◽  
Vol 15 (1) ◽  
Author(s):  
Nicholas Apergis ◽  
Stephen M. Miller ◽  
Effrosyni Alevizopoulou
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Bank Lending ◽  
Monetary Shocks ◽  
Policy Rule ◽  
Bank Lending Channel ◽  
Lending Channel ◽  
Main Indicator ◽  
Monetary Policy Rule ◽  
Loan Supply

AbstractThe monetary authorities affect macroeconomic activity through various channels of influence. This paper examines the bank lending channel, which considers how central bank actions affect the loan supply through its main indicator of policy, the real short-term interest rate. This paper employs the endogenously determined target interest rate, emanating from the European Central Bank’s monetary policy rule, to examine the operation of the bank lending channel. Furthermore, it examines whether different bank-specific characteristics affect how Eurozone banks react to monetary shocks. That is, do sounder banks react more to the monetary policy rule than less-sound banks? The paper finds evidence of an active and statistically and economically significant bank lending channel for the Eurozone between 2000 and 2009.

scholarly journals A INÉRCIA DA TAXA DE JUROS NA POLÍTICA MONETÁRIA

2004 ◽  
Vol 30 (2) ◽  
Author(s):  
Fernando De Holanda Barbosa
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Central Bank ◽  
Inflation Rate ◽  
Smoothing Parameter ◽  
The Other ◽  
Policy Rule ◽  
Monetary Policy Rule ◽  
Bank Behavior ◽  
Inflation Inertia

Um fato estilizado no comportamento dos bancos centrais consiste na suavização da taxa de juros, na qual o reajuste da taxa de juros depende de sua própria história recente. Este trabalho tem como objetivo analisar as condições que o parâmetro de suavização tem de satisfazer a regra de política monetária estável. A análise é feita em dois modelos, num existe inércia da taxa de inflação e no outro a taxa de inflação pode mudar instantaneamente de valor. Abstract A stylized fact of central bank behavior is interest rate smoothing. This paper takes this fact as given and analyses the conditions that the smoothing parameter of the monetary policy rule has to attend for the model to be stable. This analysis is done in two models, one with inflation inertia and the other one with inflation rate as a jump variable.

scholarly journals Monetary policy rule for Poland – results for various specifactions

2011 ◽  
Vol 2 (3) ◽  
pp. 5-21 ◽  
Author(s):  
Paweł Baranowski
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Monetary Authority ◽  
Output Gap ◽  
Reaction Function ◽  
Policy Rule ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Monetary Policy Rule ◽  
The Interest Rate

The aim of the paper is to analyse monetary policy rules for Poland. We estimate models based on the proposition of Taylor (1993), augmented with interest rate smoothing. We deal with the case of instantaneous as well as forward-looking relationship between interest rate and inflation. In the latter case, the proposition of data-rich reaction function (Bernanke and Boivin, 2003) was also considered. The evidence show that Polish monetary authority reaction to inflation is strong, contrary to the output gap. In addition, we found strong interest smoothing, which implies time-distributed response of the interest rate.

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