Rational Expectations, Long-run Taylor Rule, and Forecasting Inflation
2
조회
0
다운로드
2
인용
0
참고문헌
키워드
초록
The rational expectations model implies that nominal interest rates reflect expectations of inflation, and thus the term structure of interest rates provides information on the future change in inflation. However, the monetary authority manipulates the short-term interest rate in response to the change in the price level, and accordingly the prediction of inflation cannot be separated from the monetary policy. This paper explores the linkage between the monetary policy rules and the prediction of inflation. The prediction of inflation can be influenced by the monetary policy rules if the Fed reacts strongly to inflation. Using the long-run Taylor rule, an assessment of the prediction performance regarding future change in inflation is provided. The empirical results indicate that the long-run Taylor rule improves forecasting accuracy.
Abstract
The rational expectations model implies that nominal interest rates reflect expectations of inflation, and thus the term structure of interest rates provides information on the future change in inflation. However, the monetary authority manipulates the short-term interest rate in response to the change in the price level, and accordingly the prediction of inflation cannot be separated from the monetary policy. This paper explores the linkage between the monetary policy rules and the prediction of inflation. The prediction of inflation can be influenced by the monetary policy rules if the Fed reacts strongly to inflation. Using the long-run Taylor rule, an assessment of the prediction performance regarding future change in inflation is provided. The empirical results indicate that the long-run Taylor rule improves forecasting accuracy.
참고문헌 (21)
- Andrews, "“Tests for Parameter Instability and Structural Change with Unknown Change Point", ” eco(metrica 61), pp.4 821~1993 56
- Atkeson, A, "Are Phillips Curves Useful for Forecasting Inflation?", 25, pp.2~11
- Balduzzi, P, "A Model of Target Changes and the Term Structure of Interest Rates", 39(2), pp.223~249 (1997)
- Clarida, R, "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some", 115(1), pp.147~180 (2000)
- Estrella, "“The Term Structure as a Predictor of Real Economic Activity ” Journal of Finance 46", pp.2 555~1991 76
- Fama, "“Term-Structure Forecasts of Interest Rates ” Journal of Monetary Economics 25", pp.1 59~1990 76
- Fisher, "The Theory of Interest" (1930), Macmillan
- Johansen, "“Statistical Analysis of Cointegration Vectors ” Journal of Economic Dynamics and Control 12", (s), pp.2 231~54
- Judd, J, "Taylor′s Rule and the Fed: 1970-1997", (3), pp.3~16 (1998)
- and Miron, "“The Changing Behavior of the Term Structure of Interest Rates ” Quarterly Journal of Economics 101", pp.2 211~1986 28
- Mishkin, "“What Does the Term Structure Tell Us about Future Inflation?” Journal of Monetary Economics 25", pp.1 77~1990 95
- Mishkin, "“A Multi-Country Study of the Information in the Shorter Maturity Term Structure about Future Inflation ” Journal of International Money and Finance 19", pp.1 2~1991 22
- Orphanides, A, "The Quest for Prosperity without Inflation", 50(3), pp.633~663 (2003)
- Rudebusch, G, "Federal Reserve Interest Rate Targeting, Rational Expectations, and the Term Structure", 35(2), pp.245~274 (1995)
- Rudebusch, G, "Term Structure Evidence on Interest Rate Smoothing and Monetary Policy Inertia", 49(6), pp.1161~1187 (2002)
- Ruge-Murcia, F, "Does the Barro-Gordon Model Explain the Behavior of Us Inflation? A Reexamination of Empirical Evidence", 50(6), pp.1375~1390 (2003)
- Seo, B, "Tests for Structural Change in Cointegrated Systems", 14(2), pp.222~259 (1998)
- Seo, B, "Nonlinear Mean Reversion in the Term Structure of Interest Rates", 27, pp.2243~2265
- Stock, J. H, "Forecasting Inflation", 44(2), pp.293~335 (1999)
- Taylor, "“Discretion versus Policy Rules in Practice ” Carnegie-Rochester Conference Series on Public Policy 39"
- Woodford, M, "Optimal Monetary Policy Inertia", (7261) (1999)