Drescher, Christian and Erler, Alexander and Krizanac, Damir (2010): The Fed's TRAP: A Taylor-type Rule with Asset Prices.
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The paper examines if US monetary policy implicitly responds to asset prices. Using real-time data and a GMM framework we estimate a Taylor-type rule with an asset cycle variable, which refers to real estate prices. To analyze the Fed's responses we describe real estate price movements by means of an asset cycle dating procedure. This procedure reveals quasi real-time bull and bear markets. Our analysis yields two main findings. Firstly, the Fed does implicitly respond to real estate prices. Secondly, these responses are pro-cyclical and their intensity changes over time.
|Item Type:||MPRA Paper|
|Original Title:||The Fed's TRAP: A Taylor-type Rule with Asset Prices|
|Keywords:||Fed; Monetary Policy; Taylor Rule; Asset Price Cycles; Real Estate|
|Subjects:||E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy
|Depositing User:||Alexander Erler|
|Date Deposited:||14. Jun 2010 21:31|
|Last Modified:||12. Feb 2013 09:19|
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