Does the foreign interest rate matter for monetary policy? Evidence from nonlinear Taylor rules

Konferenzbeitrag

Abstract. Deviations of policy interest rates from the levels implied by the Taylor rule have been persistent after the turn of the century even before the financial crisis. These deviations could be due to lower real interest rates, as stated by the savings glut hypothesis as well as the apparent success of monetary policy in combating inflation. Alternatively, they might reflect the omission of relevant variables in the standard rule, such as international dependencies in the interest rate setting of central banks. By using a smooth transition regression approach for three major central banks, this paper provides evidence for nonlinear threshold dynamics. In fact, the foreign interest rate is well-suited to improve standard Taylor-Rules.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2014: Evidenzbasierte Wirtschaftspolitik - Session: Empirical Macro: Credibility, Ability, and Central Bank Reaction Functions ; No. B19-V3

Classification and Topics

• Classification: Wirtschaft ; Interest Rates: Determination, Term Structure, and Effects ; Monetary Policy ; Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Belke, Ansgar ; Beckmann, Joscha ; Dreger, Christian
• Event: Veröffentlichung
• (who): ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
• (where): Kiel und Hamburg
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/100450
• Last update: 10.03.2025, 11:45 AM CET