Taylor-type rules versus optimal policy in a Markov-switching economy
Autor(a) principal: | |
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Data de Publicação: | 2008 |
Outros Autores: | , |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/1822/7881 |
Resumo: | We analyse the effect of uncertainty concerning the state and the nature of asset price movements on the optimal monetary policy response. Uncertainty is modelled by adding Markov-switching shocks to a DSGE model with capital accumulation. In our analysis we consider both Taylor-type rules and optimal policy. Taylor rules have been shown to provide a good description of US monetary policy. Deviations from its implied interest rates have been associated with risks of financial disruptions. Whereas interest rates in Taylor-type rules respond to a small subset of information, optimal policy considers all state variables and shocks. Our results suggest that, when a bubble bursts, the Taylor rule fails to achieve a soft landing, contrary to the optimal policy. |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Taylor-type rules versus optimal policy in a Markov-switching economyAsset pricesMonetary policyMarkov switchingWe analyse the effect of uncertainty concerning the state and the nature of asset price movements on the optimal monetary policy response. Uncertainty is modelled by adding Markov-switching shocks to a DSGE model with capital accumulation. In our analysis we consider both Taylor-type rules and optimal policy. Taylor rules have been shown to provide a good description of US monetary policy. Deviations from its implied interest rates have been associated with risks of financial disruptions. Whereas interest rates in Taylor-type rules respond to a small subset of information, optimal policy considers all state variables and shocks. Our results suggest that, when a bubble bursts, the Taylor rule fails to achieve a soft landing, contrary to the optimal policy.NIPE – Núcleo de Investigação em Políticas Económicas – is supported by the Portuguese Foundation for Science and Technology through the Programa Operacional Ciência e Inovação 2010 (POCI 2010) of the III Quadro Comunitário de Apoio (QCA III), which is financed by FEDER and Portuguese funds.Universidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE)Universidade do MinhoAlexandre, FernandoGabriel, Vasco J.Bação, Pedro20082008-01-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/1822/7881engNIPE Working Paper series; 15info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-07-21T12:00:46Zoai:repositorium.sdum.uminho.pt:1822/7881Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T18:50:37.937099Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
Taylor-type rules versus optimal policy in a Markov-switching economy |
title |
Taylor-type rules versus optimal policy in a Markov-switching economy |
spellingShingle |
Taylor-type rules versus optimal policy in a Markov-switching economy Alexandre, Fernando Asset prices Monetary policy Markov switching |
title_short |
Taylor-type rules versus optimal policy in a Markov-switching economy |
title_full |
Taylor-type rules versus optimal policy in a Markov-switching economy |
title_fullStr |
Taylor-type rules versus optimal policy in a Markov-switching economy |
title_full_unstemmed |
Taylor-type rules versus optimal policy in a Markov-switching economy |
title_sort |
Taylor-type rules versus optimal policy in a Markov-switching economy |
author |
Alexandre, Fernando |
author_facet |
Alexandre, Fernando Gabriel, Vasco J. Bação, Pedro |
author_role |
author |
author2 |
Gabriel, Vasco J. Bação, Pedro |
author2_role |
author author |
dc.contributor.none.fl_str_mv |
Universidade do Minho |
dc.contributor.author.fl_str_mv |
Alexandre, Fernando Gabriel, Vasco J. Bação, Pedro |
dc.subject.por.fl_str_mv |
Asset prices Monetary policy Markov switching |
topic |
Asset prices Monetary policy Markov switching |
description |
We analyse the effect of uncertainty concerning the state and the nature of asset price movements on the optimal monetary policy response. Uncertainty is modelled by adding Markov-switching shocks to a DSGE model with capital accumulation. In our analysis we consider both Taylor-type rules and optimal policy. Taylor rules have been shown to provide a good description of US monetary policy. Deviations from its implied interest rates have been associated with risks of financial disruptions. Whereas interest rates in Taylor-type rules respond to a small subset of information, optimal policy considers all state variables and shocks. Our results suggest that, when a bubble bursts, the Taylor rule fails to achieve a soft landing, contrary to the optimal policy. |
publishDate |
2008 |
dc.date.none.fl_str_mv |
2008 2008-01-01T00:00:00Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/1822/7881 |
url |
http://hdl.handle.net/1822/7881 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
NIPE Working Paper series; 15 |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.publisher.none.fl_str_mv |
Universidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE) |
publisher.none.fl_str_mv |
Universidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE) |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
instname_str |
Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
instacron_str |
RCAAP |
institution |
RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
collection |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
repository.name.fl_str_mv |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
repository.mail.fl_str_mv |
|
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1799132275237978112 |