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| Author: | Alcidi, C. Flamini, A. Fracasso, A. |
| Title: | Policy regime changes, judgment and Taylor rules in the Greenspan era |
| Journal: | Economica
2011 : JAN, VOL. 78:309, p. 89-107 |
| Index terms: | monetary policy risk management interest rates uncertainty central banks banking models USA |
| Language: | eng |
| Abstract: | This paper examines policy deviations from linear Taylor (hereafter as: T.) rules motivated by the risk management approach followed by the Fed during the Greenspan era. A non-linear monetary policy rule is estimated through a logistic smoothing transition regression model with policy-makers' (herein as: p-ms.) judgment driving the transition across policy regimes. It is found that ignoring judgment-induced non-linearities while estimating T. rules has remarkable costs as to the fit: above 250 bps in 10 quarters. Despite linear T. rules describe well the lines of monetary policy, they do not detect relevant policy decisions driven by p-ms.' judgment. |
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