Paez-Farrell, J. (2015) Taylor rules, central bank preferences and inflation targeting. Working Paper. Sheffield Economic Research Paper Series (SERPS), 201502 (023). Department of Economics, University of Sheffield ISSN 1749-8368
Abstract
The objective of this paper is to infer the policy preferences of three inflation targeting central banks, Australia, Canada and New Zealand, using an estimated New Keynesian small open economy model. While I assume that the monetary authorities optimise, I depart from previous research by assuming that monetary policy is implemented via simple Taylor-type rules, as suggested by most of the empirical literature. I then derive the weights in the objective function that make the resulting optimal interest rate rule coincide with its estimated counterpart. Therefore, from the central bank’s point of view, actual policy is optimal.
Metadata
Item Type: | Monograph |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | The Sheffield Economic Research Paper Series (SERPS) offers a forum for the research output of the Department of Economics, University of Sheffield. Papers are reviewed for quality and presentation by two internal referees and a departmental editor. However, the contents and opinions expressed remain the responsibility of the author(s). Comments are welcomed and should be addressed to the individual author(s). |
Keywords: | Small open economies; monetary policy; policy preferences; Taylor rule; inverse optimal control; inflation targeting |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Department of Economics (Sheffield) > Sheffield Economics Research Papers Series |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 27 Jan 2016 17:18 |
Last Modified: | 27 Jan 2016 17:18 |
Published Version: | https://www.sheffield.ac.uk/economics/research/ser... |
Status: | Published |
Publisher: | Department of Economics, University of Sheffield |
Series Name: | Sheffield Economic Research Paper Series (SERPS) |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:92442 |