This paper estimates Taylor rules featuring instabilities in policy parameters and switches in policy shocks’volatility for the post-WWII U.S. economy. We contrast a rule embedding a fi…xed-in‡flation target with another featuring trend inflation, i.e. a time-varying inflation target. The rule embedding trend inflation turns out to be a) empirically superior according to a marginal likelihood-based comparison, and b) more able to pin down some relevant episodes of the post-WWII U.S. monetary policy history. Estimates conducted with Greenbook data confirm the empirical superiority of the rule featuring a time-varying inflation target. A comparison with recently published estimates of trend inflation is also conducted

Policy rules, regime switches, and trend inflation: an empirical investigation for the United States

Raggi D
2014-01-01

Abstract

This paper estimates Taylor rules featuring instabilities in policy parameters and switches in policy shocks’volatility for the post-WWII U.S. economy. We contrast a rule embedding a fi…xed-in‡flation target with another featuring trend inflation, i.e. a time-varying inflation target. The rule embedding trend inflation turns out to be a) empirically superior according to a marginal likelihood-based comparison, and b) more able to pin down some relevant episodes of the post-WWII U.S. monetary policy history. Estimates conducted with Greenbook data confirm the empirical superiority of the rule featuring a time-varying inflation target. A comparison with recently published estimates of trend inflation is also conducted
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10278/3736580
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