Dissecting Taylor Rules in a Structural VAR

January 1, 2010

Preview Citation

Format: Chicago

Woon Gyu Choi, and Yi Wen. Dissecting Taylor Rules in a Structural VAR, (USA: International Monetary Fund, 2010) accessed December 28, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper uncovers Taylor rules from estimated monetary policy reactions using a structural VAR on U.S. data from 1959 to 2009. These Taylor rules reveal the dynamic nature of policy responses to different structural shocks. We find that U.S. monetary policy has been far more responsive over time to demand shocks than to supply shocks, and more aggressive toward inflation than output growth. Our estimated dynamic policy coefficients characterize the style of policy as a "bang-bang" control for the pre-1979 period and as a gradual control for the post-1979 period.

Subject: Business cycles, Central bank policy rate, Economic growth, Economic theory, Financial services, Inflation, Prices, Production, Production growth, Supply shocks

Keywords: Business cycles, Central bank policy rate, Endogenous monetary policy, GDP deflator, Global, Inflation, Inflation pressure, Inflation volatility, Interest rate, Interest rate volatility, Monetary policy, Output growth, Production growth, Spectral decomposition, Structural VAR, Supply shocks, Taylor rule, WP

Publication Details

Pages:

27
Volume:

---
DOI:

---
Issue:

---
Series:

Working Paper No. 2010/020
Stock No:

WPIEA2010020
ISBN:

9781451962291
ISSN:

1018-5941

FACTSHEETS

RESOURCES

TOPICS

Flagship Publications

Other Publications

IMF reports and publications by country

Regional Offices

All News

See Also

For Journalists

Press Center

RESOURCES

FLAGSHIPS

KEY SERIES

IMF NOTES

IMF Working Papers