Are inflation targeting Central Banks’ forecasts internally consistent with the Taylor Principle?

• Autor(a) principal: Kogelfranz, Jan-Martin
• Data de Publicação: 2017
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10400.14/23837
• topic: Domínio/Área Científica::Ciências Sociais::Economia e Gestão

This thesis addresses the vital question whether ex ante inflation targeting central banks’ forecasts are internally consistent with the undisputable Taylor Principle. Ex ante quarterly published monetary policy forecasts for t+1 and t+2 years for the Swedish Riksbank, and the Reserve Bank of New Zealand as well as ex ante quarterly published monetary policy forecasts for t+1 year for the U.S. Fed are evaluated for the period from Q1/1996 to Q2/2017.Various Taylor-type Rule specifications are used for the analysis. Ex ante central banks’ forecasts are proven to be consistent with the Taylor Principle pre-financial crisis for the ex ante forecast horizon of t+1 year in all cases and for the t+2 year time forecast in the case of New Zealand. Post-crisis evidence for monetary policy behavior, consistent with the Taylor Principle, can only be provided for the Swedish Riksbank, indicating an extreme shift in monetary policy post-financial crisis for the U.S. Fed and the Reserve Bank of New Zealand. Finally, evidence for excessive interest rate smoothing behavior and policy inertia, ranging up to 90% as well as evidence for a potential break in real interest equilibrium rates post-financial crisis, is provided.