Estimating Taylor-Type Rules: An Unbalanced Regression?

Abstract

Relying on Clive Granger's many and varied contributions to econometric analysis, this paper considers some of the key econometric considerations involved in estimating Taylor-type rules for US data. We focus on the roles of unit roots, cointegration, structural breaks, and non-linearities to make the case that most existing estimates are based on an unbalanced regression. A variety of estimates reveal that neglected cointegration results in the omission of a necessary error correction term and that Federal Reserve (Fed) reactions during the Greenspan era appear to have been asymmetric. We argue that error correction and non-linearities may be one way to estimate Taylor rules over long samples when the underlying policy regime may have changed significantly.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 31 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.