Monetary Policy Risk: Rules vs. Discretion
64 Pages Posted: 3 Sep 2013 Last revised: 14 Jul 2021
There are 3 versions of this paper
Identifying Taylor Rules in Macro-Finance Models
Identifying Taylor Rules in Macro-Finance Models
Date Written: August 2013
Abstract
is an important contributor to aggregate risk. In addition, discretionary easing coincides with good news about the macroeconomy in the form of lower inflation, higher output growth, and lower risk premiums on short-term nominal bonds. However, it also coincides with bad news about long-term financial conditions in the form of higher risk premiums on long-term nominal bonds. Shocks to the rule correlate with changes in the yield curve' s level. Shocks to discretion correlate with changes in its slope
JEL Classification: E43, E52, G12
Suggested Citation: Suggested Citation
David K. Backus (Contact Author)
NYU Stern School of Business (deceased)
44 West Fourth Street
New York, NY 10012
United States
212-998-0873 (Phone)
212-995-4220 (Fax)
HOME PAGE: http://pages.stern.nyu.edu/~dbackus/
Stanley E. Zin
Leonard N. Stern School of Business - Department of Economics ( email )
269 Mercer Street
New York, NY 10003
United States
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