2 edition of Optimal Taylor rules in an estimated model of a small open economy found in the catalog.
Optimal Taylor rules in an estimated model of a small open economy
|Series||Bank of Canada working paper -- 2004-36, Working paper (Bank of Canada) -- 2004-36.|
|Contributions||Dib, Ali, 1967-, Bank of Canada.|
|The Physical Object|
|Pagination||v, 33 p. ;|
|Number of Pages||33|
a variety of models and is therefore more robust than model-specific optimal and more complex policy rules. See Taylor and Williams () for a detailed discussion. However, it needs to be borne in mind that this robustness has emerged over a class of models where price rigidities are the only friction in the economy. 7 In the standard New. “A legislated Taylor Rule would involve Congress micro-managing how the Fed, in turn, micro-manages the economy.” Economists have long debated whether rules or discretion should govern monetary policy. But after inflation declined in the s, the debate partly subsided as many began to favor what are called “feedback rules.” With strict rules seen as too [ ].
We then consider the robustness of policy rules using comparative model simulations and show that simple rules are more robust than fully optimal rules. The most recent paper in the Elsevier Handbook in Economics series on monetary policy rules is the comprehensive and widely-cited survey published by Ben McCallum () in the. About the Book. Macroeconomics: Theory, Markets, and Policy provides complete, concise coverage of introductory macroeconomics theory and policy. It examines the Canadian economy as an economic system, and embeds current Canadian institutions and approaches to monetary policy and fiscal policy within that system.
We develop a dynamic stochastic general equilibrium model of a small open economy in which both price rigidity and financial friction exist. We compare two cases featuring different interest rate rules. Both cases use the standard Taylor‐type interest rate rules, . Taylor: Well, first the original version of the Taylor rule—I did not call it the Taylor rule then, of course; others gave it that name—purposely did not include exchange rates, even though the model that I simulated to derive the best rule was an open economy model. I used a multicountry, rational expectations model estimated to data of.
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Downloadable. We develop a model of a small open economy with three types of nominal rigidities (domestic goods prices, imported goods prices and wages) and eight different structural shocks. We estimate the model's structural parameters using a maximum likelihood procedure and use it to compute welfare-maximizing Taylor rules for setting domestic short-term interest rates.
Downloadable. The authors compute welfare-maximizing Taylor rules in a dynamic general-equilibrium model of a small open economy.
The model includes three types of nominal rigidities (domestic-goods prices, imported-goods prices, and wages) and eight different structural shocks. The authors estimate the model's structural parameters by maximum likelihood using Canadian and U.S. data, and use a. Optimal Taylor Rules in an Estimated Model of a Small Open Economy by Steve Ambler,1 Ali Dib,2 and Nooman Rebei3 1CIRPEE Université du Québec à Montréal C.P.
Succ. Centre-Ville Montréal, QC, Canada H3C 3P8 @ 2International Department 3Research Department Bank of Canada Ottawa, Ontario, Canada K1A 0G9 adib Cited by: Optimal Taylor Rules in an Estimated Model of a Small Open Economy⁄ Steve Amblery Ali Dibz Nooman Rebeix December Abstract We develop a model of a small open economy with three types of nominal rigidities (domestic goods prices, imported goods prices and wages) and eight diﬁerent structural shocks.
CiteSeerX - Document Details (Isaac Councill, Lee Giles, Pradeep Teregowda): We compute welfare-maximizing Taylor rules in a dynamic general equilibrium model of a small open economy.
The model includes three types of nominal rigidities (domestic goods prices, imported goods prices and wages) and eight different structural shocks. We estimate its structural parameters using a maximum.
Optimal Taylor Rules in an Estimated Model of a Small Open Economy. We develop a model of a small open economy with three types of nominal rigidities (domestic goods prices, imported goods. This paper computes welfare maximizing Taylor-style interest rate rules, in a business cycle model of a small open economy.
The model assumes staggered price setting and shocks to domestic. The authors compute welfare-maximizing Taylor rules in a dynamic general-equilibrium model of a small open economy. The model includes three types of nominal rigidities (domestic-goods prices, imported-goods prices, and wages) and eight different structural shocks.
Taylor-type rules that include asset prices, interest rate spreads or credit aggregates. Their inclusion is meant to make monetary policy respond to signs of financial frictions.1 A discussion of Taylor-type rules for small open economies raises the question of whether monetary policy should respond to the (real or nominal) exchange rate.
At the same time a related theoretical literature has attempted to characterise optimal monetary policy in the context of small country open economy models. 2 In deriving optimal monetary policy rules for a benchmark small open economy model, Clarida et al.
() argue that the policy maker's problem is isomorphic to that in the closed economy. This paper explores optimal monetary and macroprudential policy rules for a small open economy under a sudden reversal of capital flows. 1 We consider Taylor-type interest rate rules as a function of inflation, output, and credit growth; and a macroprudential instrument as a function of credit growth.
We have two key results. The Taylor Rule is an interest rate forecasting model invented by famed economist John Taylor in and outlined in his study, "Discretion Versus Policy Rules in. Other examples of this indeterminacy use the Taylor rule as a starting point. This discussion is inspired by the models examined in Ang, Dong, and Piazzesi ().A baseline Taylor () rule is that the nominal short rate depends on the output gap, inflation, and an unobserved monetary policy component.
Denote the persistent components of the nominal short rate, the output gap, and inflation. While Taylor rules are useful descriptions of actual policy and common components of many prominent New Keynesian models, it is well‐known that optimal monetary policy is rarely given by a Taylor rule.
Instead, optimal policy depends in complicated ways on the underlying state. Many analyses of policy rules assume a closed economy. This paper extends the Svensson-Ball model to an open economy and asks how the optimal policies change. The short answer is they change quite a bit. In open economies, inflation targets and Taylor rules.
Many analyses of policy rules assume a closed economy. This paper extends the Svensson-Ball model to an open economy and asks how the optimal poli- cies change. The short answer is they change quite a bit. In open economies, inflation targets and Taylor rules.
Get this from a library. Optimal Taylor rules in an estimated model of a small open economy. [Steve Ambler; Ali Dib; Bank of Canada.]. The first macroeconomic model was built 80 years ago by Jan Tinbergen in The model was Keynesian with 32 stochastic equations based on the macroeconomic ideas of John Maynard Keynes.
Important for the purposes of this workshop, the model was developed to answer an important monetary policy question: Whether a small open economy’s currency. The Taylor rule is a simple equation—essentially, a rule of thumb—that is intended to describe the interest rate decisions of the Federal Reserve’s Federal Open.
of existing rules when the model economy is buffeted by various shocks. The existing rules include the Taylor closed-economy rule, naïve MCI-based rules as well as Ball™s MCI-based rule, and inflation forecast-based rules.
Some of the rules in the family we consider appear to be robust across a set of different shocks, including shocks from the. Taylor's rule for open economy. In order to effectively monitor processes in an open economy, the Taylor rule for an open economy is used - a rule that indicates to the central bank how to change the nominal interest rate for any changes in the parameters of an open economy.Under an optimal Taylor rule, the estimated deviations of output and inflation from their targets should be negatively correlated.
We close the model by assuming that the monetary authority commits to a Taylor rule, E ç L é 77) and Romer (, p.
) analyze Taylor rules in which the intercept is assumed to be the natural rate of.6 Optimal simple policy rules in the Taylor, CEE/ACEL and SW models 21 7 Robustness 27 text-book-style models, estimated medium- and large-scale models of the U.S. and euro area economies, and some estimated open-economy and multi-country models.
Software and models are .