Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/102400
Authors: 
Beckmann, Joscha
Belke, Ansgar
Dreger, Christian
Year of Publication: 
2014
Series/Report no.: 
Discussion Paper, European University Viadrina, Department of Business Administration and Economics 359
Abstract: 
Deviations of policy interest rates from the levels implied by the Taylor rule have been persistent before the financial crisis and increased especially after the turn of the century. Compared to the Taylor benchmark, policy rates were often too low. This paper provides evidence that both international spillovers, for instance international dependencies in the interest rate setting of central banks, and nonlinear reaction patterns can offer a more realistic specification of the Taylor rule in the main industrial countries. The inclusion of international spillovers and, even more, nonlinear dynamics improves the explanatory power of standard Taylor reaction functions. Deviations from Taylor rates tend to be smaller and their negative trend can be eliminated.
Subjects: 
Taylor rule
international spillovers
monetary policy interaction
smooth transition models
JEL: 
E43
F36
C22
Document Type: 
Working Paper

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