Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/186692
Authors: 
Carneiro, Dionisio Dias
Duarte, Pedro Garcia
Year of Publication: 
2001
Series/Report no.: 
Texto para discussão No. 450
Abstract (Translated): 
The fit of empirical Taylor Rules to Brazilian data improves if we consider the hypothesis of interest rate inertia. Inertia seems to be part of monetary policy of several countries and reflects the action of Central Banks of not adjusting once-for-all to changing conditions. This article extends the concept of inertia considered by Duarte (2001) in the general intertemporal equilibrium model developed by Woodford (2000(b)), which corresponds to the monetary shock first-order autoregressive coefficient. We explore here the concept of inertia related to the presence of first lag of interest rate in the three Taylor rules examined in characterization of impulse response functions of variables to a monetary shock. The short run response of variables and the time it takes for their return to equilibrium depend more on the autoregressive coefficient of the shock than on the interest rate inertia. But this inertia is important when the Taylor Rule includes lagged inflation and output, because in this case, a smaller oscillation of the response of variables to shocks is obtained. It is also important in the case of forward looking Taylor Rule.
JEL: 
E17
E47
E52
Document Type: 
Working Paper

Files in This Item:
File
Size
236.08 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.