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| Author: | Assenmacher-Wesche, K. |
| Title: | Estimating Central Banks' preferences from a time-varying empirical reaction function |
| Journal: | European Economic Review
2006 : NOV, VOL. 50:8, p. 1951-1974 |
| Index terms: | monetary policy inflation central banks models Europe USA |
| Language: | eng |
| Abstract: | Monetary policy reaction functions (hereafter as: r-fnct./r-fncts.) are estimated for the United States (U.S.), the United Kingdom (U.K.), and Germany, using a Markov switching model allowing for coefficient shifts of the central bank's (here as: c-b./c-bs.) r-fnct. and for independent shifts in the residual variance. The results indicate that c-b. policy can be characterized as falling into a low- and a high-inflation regime. To recover the c-bs.' preferences, the preference parameters are estimated jointly with a small model of the economy. The results show among others that the Bundesbank of Germany has placed a relatively higher weight on inflation than the U.S. Fed. |
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