Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/279200 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10451
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper assesses time variation in monetary policy rules by applying a Time-Varying Parameter Generalised Methods of Moments (TVP-GMM) framework. Using monthly data until December 2022 for five inflation targeting countries (the UK, Canada, Australia, New Zealand, Sweden) and five countries with alternative monetary regimes (the US, Japan, Denmark, the Euro Area, Switzerland), we find that monetary policy has become more averse to inflation and more responsive to the output gap in both sets of countries over time. In particular, there has been a clear shift in inflation targeting countries towards a more hawkish stance on inflation since the adoption of this regime and a greater response to both inflation and the output gap in most countries after the global financial crisis, which indicates a stronger reliance on monetary rules to stabilise the economy in recent years. It also appears that inflation targeting countries pay greater attention to the exchange rate pass-through channel when setting interest rates. Finally, monetary surprises do not seem to be an important determinant of the evolution over time of the Taylor rule parameters, which suggests a high degree of monetary policy transparency in the countries under examination.
Subjects: 
Taylor rules
monetary policy rules
Generalised Methods of Moments
Time-varying parameters
JEL: 
C14
C52
E52
E58
Document Type: 
Working Paper
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