A comparison of optimal policy rules prior to and during inflation targeting: empirical evidence from Bank of Canada

Name: A comparison of optimal policy rules prior to and during inflation targeting: empirical evidence from Bank of Canada
Author: Eksi, O., Kaya Eksi, N., Özlale, Ümit

İsim	A comparison of optimal policy rules prior to and during inflation targeting: empirical evidence from Bank of Canada
Yazar	Eksi, O., Kaya Eksi, N., Özlale, Ümit
Basım Tarihi:	2017
Basım Yeri	- Taylor & Francis
Konu	Inflation targeting, Optimal monetary policy rule, Taylor rule, Linear–quadratic regulator problem
Tür	Süreli Yayın
Dil	İngilizce
Dijital	Evet
Yazma	Hayır
Kütüphane:	Özyeğin Üniversitesi
Demirbaş Numarası	0003-6846
Kayıt Numarası	2da9c613-cbdb-4895-b861-5d800bc49e6d
Lokasyon	Economics
Tarih	2017
Notlar	Due to copyright restrictions, the access to the full text of this article is only available via subscription.
Örnek Metin	We examine policy rules that are consistent with inflation targeting (IT) framework in a small macroeconomic model of the Canadian economy. We set up an optimal linear regulator problem and derive policy rules to compare the dynamics of pre-IT and IT eras. We find that while the optimal monetary policy rule in the pre-IT period is best described with a loss function that attaches equal weight to price stability, financial stability and output stability; the IT era is dominated by the price stability objective followed by the financial stability and output stability, consecutively. Moreover, we do not find an explicit role for exchange rate stability in the objective function of the Bank of Canada for both monetary policy eras. We, then, compare the properties of the derived optimal rules with those of an ad hoc Taylor rule for the IT period. In response to inflationary shocks, Taylor rule brings down inflation rates more quickly compared to the derived policy rules, but at the cost of a higher sacrifice ratio and more volatile interest rates.
DOI	10.1080/00036846.2016.1273488
Cilt	49

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A comparison of optimal policy rules prior to and during inflation targeting: empirical evidence from Bank of Canada

Yazar Eksi, O., Kaya Eksi, N., Özlale, Ümit

Basım Tarihi 2017

Basım Yeri - Taylor & Francis

Konu Inflation targeting, Optimal monetary policy rule, Taylor rule, Linear–quadratic regulator problem

Tür Süreli Yayın

Dil İngilizce

Dijital Evet

Yazma Hayır

Kütüphane Özyeğin Üniversitesi

Demirbaş Numarası 0003-6846

Kayıt Numarası 2da9c613-cbdb-4895-b861-5d800bc49e6d

Lokasyon Economics

Tarih 2017

Notlar Due to copyright restrictions, the access to the full text of this article is only available via subscription.

Örnek Metin We examine policy rules that are consistent with inflation targeting (IT) framework in a small macroeconomic model of the Canadian economy. We set up an optimal linear regulator problem and derive policy rules to compare the dynamics of pre-IT and IT eras. We find that while the optimal monetary policy rule in the pre-IT period is best described with a loss function that attaches equal weight to price stability, financial stability and output stability; the IT era is dominated by the price stability objective followed by the financial stability and output stability, consecutively. Moreover, we do not find an explicit role for exchange rate stability in the objective function of the Bank of Canada for both monetary policy eras. We, then, compare the properties of the derived optimal rules with those of an ad hoc Taylor rule for the IT period. In response to inflationary shocks, Taylor rule brings down inflation rates more quickly compared to the derived policy rules, but at the cost of a higher sacrifice ratio and more volatile interest rates.

DOI 10.1080/00036846.2016.1273488

Cilt 49