Modelling Taylor rule uncertainty: an application to the euro area

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• 作者：Martins ; Fernando ; Machado ; José ; A.F. ; Esteves ; Paulo Soares
• 关键词：Euro area ; Density ; Methodology
• 刊名：Economic Modelling
• 出版年：2004
• 出版时间：May, 2004
• 年：2004
• 卷：21
• 期：3
• 页码：561-572
• 全文大小：200 K

文摘

This paper presents a methodology to estimate an asymmetric probability density function for a forward-looking version of the Taylor interest rate, assuming that not only the explanatory variables but also the parameters of the rule are random variables. The methodology allows for correlation across different sources of uncertainty and the resulting distribution for the Taylor interest rate is obtained by numerical simulation, avoiding any assumption concerning the aggregation of non-normal distributions. The paper presents an application for the euro area as a whole. The main conclusion is that the uncertainty surrounding the Taylor interest rate could be high, i.e. the confidence intervals could be too wide to give clear indications concerning the evolution of interest rates.