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http://hdl.handle.net/10419/61463
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| Title: | | Empirical evidence on the generalized Taylor principle  |
| Authors: | | Jovanovic, Mario |
| Issue Date: | | 2012 |
| Series/Report no.: | | Ruhr Economic Papers 334 |
| Abstract: | | During financial crises central banks usually decrease interest rates in order to reduce financial uncertainty. This behavior increases inflation risk. The trade-off between inflation and uncertainty stabilization can be modeled by the generalized Taylor rule, which describes inflation sensitivity as a function of financial uncertainty instead of a constant parameter. Based on the GMM-estimation of the generalized approach I confirm the suggested uncertainty-dependent inflation sensitivity of the Fed. Prolonged deviations from the Taylor principle are not evident. This implies that the Fed does not deemphasize inflation stabilization in favor of uncertainty stabilization - especially during the peak of the latest sub-prime crisis. |
| Abstract (Translated): | | Üblicherweise senken Zentralbanken ihren Leitzins während Finanzmarktkrisen, um Unsicherheiten im Finanzsystem zu reduzieren. Dieses Verhalten birgt das Risiko steigender Inflation. Aufgrund US amerikanischer Daten kann empirisch gezeigt werden, dass die Fed in Abhängigkeit von der gegenwärtigen Unsicherheit des Finanzsystems variabel auf Inflationserwartungen reagiert. GMM-Schätzergebnisse der verallgemeinerten Taylor-Regel deuten darauf hin, dass die Fed während der vergangenen Sub-Prime Krise zwar resolut gegen Finanzmarktunsicherheiten agiert, wobei eine andauernde Missachtung des Taylor-Prinzips nicht erkennbar ist. |
| Subjects: | | Financial instability time-varying inflation sensitivity |
| JEL: | | E44 E58 |
| Persistent Identifier of the first edition: | | doi:10.4419/86788384 |
| ISBN: | | 978-3-86788-384-9 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des RWI Ruhr Economic Papers, RWI
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