The taylor principle and monetary policy approaching a zero bound on nominal rates

Quantile regression results for the United States and Japan

Thanaset Chevapatrakul, Tae-Hwan Kim, Paul Mizen

Research output: Contribution to journalArticle

22 Citations (Scopus)

Abstract

This paper offers a new approach that estimates the response of interest rates to inflation and the output gap at various points (quantiles) on the conditional distribution of interest rates. This offers an improvement on empirical estimates conducted only at the mean and also allows us to test the propositions that policy shows greater aggression to inflation in the reaction function in terms of a greater response coefficient as interest rates reach low levels, and increasing aggression as the lower bound is approached. We find support for the Taylor principle, a more aggressive response to inflation than under a Taylor rule, but no detectable evidence of increasing aggression as the zero lower bound is approached in the US and Japan.

Original languageEnglish
Pages (from-to)1705-1723
Number of pages19
JournalJournal of Money, Credit and Banking
Volume41
Issue number8
DOIs
Publication statusPublished - 2009 Dec 1

Fingerprint

Aggression
Interest rates
Zero bound
Japan
Quantile regression
Taylor principle
Inflation
Monetary policy
Zero lower bound
Output gap
Conditional distribution
Coefficients
Taylor rule
Reaction function
Lower bounds
Quantile

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

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The taylor principle and monetary policy approaching a zero bound on nominal rates : Quantile regression results for the United States and Japan. / Chevapatrakul, Thanaset; Kim, Tae-Hwan; Mizen, Paul.

In: Journal of Money, Credit and Banking, Vol. 41, No. 8, 01.12.2009, p. 1705-1723.

Research output: Contribution to journalArticle

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