6533b857fe1ef96bd12b3b9b
RESEARCH PRODUCT
Some new results on interest rate rules in EMU and in the US
David TaguasRafael DoménechMayte Ledosubject
InflationEconomics and Econometricsmedia_common.quotation_subjectKeynesian economicsMonetary policyInternational Fisher effectGeneral Business Management and AccountingInterest rateTaylor ruleNominal interest rateEconometricsEconomicsFisher hypothesisReal interest ratemedia_commondescription
Abstract This paper offers two new results on interest rate rules. First, we show that the empirical evidence from 1970 onwards for the US is compatible with a Taylor rule when we consider the possibility of changes in the inflation target and in the real interest rate. Second, recursive estimates of a forward-looking version of the Taylor rule for EMU confirm an increasing weight for inflation in the area, possibly as a consequence of the EMS, and, furthermore, a convergence in the nineties to the German value observed for the whole period. This process has coincided with an important reduction in the deviation of inflation across EMU countries. The results also show that credibility problems have coincided with periods of higher real interest rates in the euro zone, which cannot be explained by either the inflation rate or the output gap.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2000-06-01 |