Deviations from rules-based policy and their effects

Nikolsko-Rzhevskyy, Alex; Papell, David H.; Prodan, Ruxandra

doi:10.1016/j.jedc.2014.09.034

Cited by 53 publications

(24 citation statements)

References 17 publications

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“…Our comparison between countries under IT and those under alternative regimes suggests that IT helps reduce the susceptibility of inflation and GDP as well as policy measures (interest rates and foreign reserves) to GL shocks and the volatility of key variables as a whole. This finding reconciles the argument that rule-based monetary policy provides better outcomes (Taylor, 2013a(Taylor, , 2013b(Taylor, , and 2016and Nikolsko-Rzhevskyy et al, 2014), while existing studies offer mixed results on macroeconomic performance of inflation targeting in EMEs (e.g., Brito and Bystedt, 2010;and Gonçalves and Salles, 2008).…”

Section: Comparison With Non-it Countriessupporting

confidence: 78%

Global Liquidity Transmission to Emerging Market Economies, and Their Policy Responses

et al. 2014

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This paper distills and identifies global liquidity (GL) momenta from the macro-financial data of advanced economies through a factor model with sign restrictions as policy-driven, market-driven, and risk averseness factors. Using a panel factor-augmented VAR, we investigate responses of emerging market economies (EMEs) to GL shocks. A policy-driven liquidity increase boosts growth in EMEs, elevating stock prices and currency values, while a risk averseness rise has an opposite effect. A market-driven GL expansion boosts stock markets and lowers funding costs, increasing competitiveness and current account. Inflation targeting EMEs fare better than EMEs under alternative regimes with respect to macrofinancial volatility.

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Section: Comparison With Non-it Countriessupporting

confidence: 78%

Global Liquidity Transmission to Emerging Market Economies, and Their Policy Responses

et al. 2014

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“…Our second sub-sample is inspired by Clarida (2010), describing the period 1985-2007 as the Great Moderation (GM). Although our second sub-sample is in line with the literature (Clarida, 2010;Meltzer, 2012;Taylor, 2012;Nikolsko-Rzhevskyy et al, 2014), we extend it until 2007, to de…ne a sub-sample with a relatively stable economy (despite the Dot-com crisis beginning in the 2000s) that can be compared with the crisis period starting in 2007.…”

Section: Datamentioning

confidence: 97%

“…Since the 1980s, the predictability and stability of monetary policy has improved, with many researchers currently recommending rule-based rather than discretionary monetary policy decisions (Kydland and Prescott, 1977;Taylor, 1986Taylor, , 1987Friedman, 1982;Taylor, 1993). Notice that monetary policies occurring during our …rst sub-sample were often modeled by a rule in the literature (Smets and Wouters, 2007;Nikolsko-Rzhevskyy and Papell, 2012;Nikolsko-Rzhevskyy et al, 2014).…”

Section: Datamentioning

confidence: 99%

Nominal Income Versus Taylor-Type Rules in Practice

Benchimol¹,

Fourçans

2016

SSRN Journal

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Since the beginning of the …nancial crisis, a lively debate has emerged regarding which monetary policy rule the Fed (and other central banks) should follow, if any. To clarify this debate, several questions must be answered. Which monetary policy rule …ts best the historical data? Which monetary policy rule best minimizes economic uncertainty and the Fed's loss function? Which rule is best in terms of household welfare? Among the di¤erent rules, are NGDP growth or level targeting rules a good option, and when? Do they perform better than Taylor-type rules? To answer these questions, we use Bayesian estimations to test the Smets and Wouters (2007) model under nine di¤erent monetary policy rules with US data from 1955 to 2015 and over three di¤erent sub-periods. We …nd that when considering only the central bank's loss function, the estimates generally indicate the superiority of NGDP level targeting rules, whatever the period. However, if other criteria are considered, the central bank's objectives are not consistently met by a single rule for all periods.

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“…The Taylor rule can also be used to ascertain the extent to which central banks are following rule-like behavior by comparing the actual policy rate to the rate predicted by the Taylor rule. Taylor (2012) and Papell, Nikolsko-Rzhevskyy, and Prodan (2014) find that the federal funds rate was closest to the Taylor rule during the Great Moderation era from 1983 to 2003, when Paul Volcker and Alan Greenspan were Chairmen of the Federal Reserve. Deviations from rule-like behavior were considerable during the Great Inflation period in the 1970s, a regime characterized by Friedman (1982), Meltzer (2009b), and Taylor (2012) as discretionary.…”

Section: Taylor Rulementioning

confidence: 99%

Federal Reserve Structure, Economic Ideas, and Monetary and Financial Policy

Bordo¹,

Prescott²

2019

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Deviations from rules-based policy and their effects

Cited by 53 publications

References 17 publications

Global Liquidity Transmission to Emerging Market Economies, and Their Policy Responses

Global Liquidity Transmission to Emerging Market Economies, and Their Policy Responses

Nominal Income Versus Taylor-Type Rules in Practice

Federal Reserve Structure, Economic Ideas, and Monetary and Financial Policy

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