Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/232450 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 8853
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
We analyse the use of current and forward-looking data in the setting of monetary policy (Taylor rule). We answer the question of whether the use of forward-looking data is to be preferred over the use of current data. We use a behavioural macroeconomic model that generates periods of tranquillity alternating with crisis periods characterized by fat tails in the distribution of output gap. We find that the answer to our question depends on the nature of the monetary policy regime. In general, in a strict inflation targeting regime the use of forward-looking data leads to a lower quality of monetary policymaking than in a dual mandate monetary policy regime. Finally, nowcasting tends to improve the quality of monetary policy especially in a strict inflation targeting regime.
Subjects: 
Taylor rule
behavioural macroeconomics
animal spirits
strict inflation targeting
dual mandate
nowcasting
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





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