Monetary policy and news shocks: are Taylor rules forward-looking?

Best, Gabriela; Kapinos, Pavel S.

doi:10.1515/bejm-2014-0161

Cited by 8 publications

(3 citation statements)

References 27 publications

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“…9 Alternatively, news shocks can be identified from a structural DSGE model. See Schmitt-Grohe and Uribe ( 2012) for an application to TFP news or Milani and Treadwell (2012) and Best and Kapinos (2016) for applications to multiple news shocks. 10 The averaging is applied because the Greenbook data corresponds to the eight FOMC meetings per year, resulting in regularly spaced misses in the monthly data.…”

Section: Orcidmentioning

confidence: 99%

Monetary policy news and systemic risk at the zero lower bound

Kapinos

2020

Int. J Fin Econ

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This paper employs a recent contribution to the construction of the shadow nominal interest rate during the zero lower bound episode and Greenbook forecasts to obtain a measure of monetary policy shocks over that time period.It then identifies monetary policy news shocks as a novel measure of the forward-looking conduct of monetary policy in the U.S. Using the data from 1987-2010, it shows that neither monetary news nor surprises affected alternative measures of systemic risk over the full sample. However, monetary news shocks announcing future reductions in interest rates were effective in lowering most (but not all) systemic risk measures during the zero lower bound period, unlike monetary surprises.

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Section: Orcidmentioning

confidence: 99%

Monetary policy news and systemic risk at the zero lower bound

Kapinos

2020

Int. J Fin Econ

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“…Sheffrin (1996) defined "expectation" as the predictions about uncertain economic variables made by the economic subjects. Other scholars proposed that the expectation essentially reflects whether a certain policy is forward-looking owing to the economic subjects' predictions following the implementation of pricing policies (Zheng et al, 2012;Best and Kapinos, 2016;Zhang and Dang, 2018). And forward-looking policy studies of energy price regulation still need more literature support (Lüthi and Wüstenhagen, 2012).…”

Section: Relevance To the Literaturementioning

confidence: 99%

Can energy-price regulations smooth price fluctuations? Evidence from China’s coal sector

et al. 2019

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Due to the dominance of coal in China's energy mix, coal prices have always been a challenge part of pricing reform. The recent frequent government interventions raise the key research questions: what is the actual impact of price policies on coal price fluctuations, and how can forward-looking pricing policies be made. By proposing a novel classification of coal pricing policies and introducing an expectation and forward-looking coefficient, the paper examines the relationship between coal price fluctuations and pricing policies using the generalized method of moments (GMM) method. It shows that the lagging coal price and coal demand play a positive role in regulating coal prices, while coal supply and marketization have significantly negative effects on coal price fluctuations. The heterogeneous impacts of price policies are due to differences in market players' expectations, policy instruments and the method of policy release. In addition, China's coal pricing policy portfolio from 2013 to 2016 exerted synergy effects on the restraint of coal price fluctuations. As the forward-looking coefficient was considerably low, the government's intervention behaviors were obviously biased towards ex post facto responses. The paper suggests short run and long run policy to advance marketization of coal prices amid the energy transition.

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“…Empirical studies also show the importance of price policy in responding to exchange rate changes. Best & Kapinos (2016), Kempa (2016), Lubik & Schorfheide (2007), Mohanty &Klau (2004), andTaylor (2001) explain that interest rate is the central bank's reaction function to the exchange rate changes. Furthermore, Taylor (2001) shows that when we use inflation and output from forecast results, the impact on interest rates will be more significant when exchange rate appreciation.…”

Section: Introductionmentioning

confidence: 99%

Monetary Reaction Function in Indonesia During Inflation Targeting Period

Hervino

Insukindro

Hardi

et al. 2023

JESP

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This study analyzes the monetary reaction function with shocks and the fear of floating phenomenon in the inflation targeting period in Indonesia. This study uses a new neoclassical synthesis approach. The unit root test result explains that all variables are stationary or I(0), and the long-run regression model is estimated. The results show that interest rates respond positively to future inflationary (counter-cyclical) in the log-run. The effect of triple shocks on interest rates in Indonesia is estimated using the Forward-Looking Model (FLM) and Error Correction Model (ECM). Using a predictive model performance (informal test), the best model in this study is FLM. In the short-run, only fluctuations in world oil prices significantly affect interest rates (counter-cyclical policy). Furthermore, BI's response to future inflation cannot be compared with BI's response to economic fluctuations, so this study has not been able to explain the significant effect of economic fluctuations on deposit interest rates. It means that the fear of the floating phenomenon cannot be explained in this study.

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Monetary policy and news shocks: are Taylor rules forward-looking?

Cited by 8 publications

References 27 publications

Monetary policy news and systemic risk at the zero lower bound

Monetary policy news and systemic risk at the zero lower bound

Can energy-price regulations smooth price fluctuations? Evidence from China’s coal sector

Monetary Reaction Function in Indonesia During Inflation Targeting Period

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