Levieuge, Grégory and Lucotte, Yannick (2012): A simple empirical measure of central banks' conservatism.
Download (1MB) | Preview
In this paper we suggest a simple empirical and model-independent measure of Central Banks' Conservatism, based on the Taylor curve. This new indicator can easily be extended in time and space, whatever the underlying monetary regime of the considered countries. We demonstrate that it evolves in accordance with the monetary experiences of 32 OECD member countries from 1980, and is largely equivalent to the model-based measure provided by Krause & Méndez [Southern Economic Journal, 2005]. We finally bring forward the interest of such an indicator for further empirical analysis dealing with the preferences of Central Banks.
|Item Type:||MPRA Paper|
|Original Title:||A simple empirical measure of central banks' conservatism|
|Keywords:||Central Banks' preferences; Conservatism; Taylor curve; Taylor rule|
|Subjects:||E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Interest Rates: Determination, Term Structure, and Effects
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
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E47 - Forecasting and Simulation: Models and Applications
|Depositing User:||Yannick Lucotte|
|Date Deposited:||30. Apr 2012 00:28|
|Last Modified:||17. Feb 2013 11:12|
Assenmacher-Wesche, K. (2006), Estimating central banks' preferences from a time-varying empirical reaction function, European Economic Review 50(8), 1951-1974.
Ball, L. (1997), Efficient rules for monetary policy, NBER Working Paper 5952.
Banaian, K. (2008), Measuring central bank independence: Ordering, ranking, or scoring?,in K. Banaian & B. Roberts, eds, `The Design and Use of Political Economy Indicators', Palgrave Macmillan, pp. 33-55.
Berger, H., De Haan, J. & Eijffinger, S. (2001), Central bank independence: an update of theory and evidence, Journal of Economic Surveys 15(1), 3-40.
Bernanke, B. & Mishkin, F. (1997), Inflation targeting: a new framework for monetary policy?, Journal of Economic Perspectives 11(2), 97-116.
Castelnuovo, E. & Surico, P. (2003), What does monetary policy reveal about a central bank's preferences?, Economic Notes 32, 335-359.
Castelnuovo, E. & Surico, P. (2004), Model uncertainty, optimal monetary policy and the preferences of the Fed, Scottish Journal of Political Economy 51(1), 105-126.
Cecchetti, S. G. & Ehrmann, M. (2002), Does inflation targeting increase output volatility?: An international comparison of policymakers' preferences and outcomes, in N. Loayza, K. Schmidt-Hebbel & N. Loayza, eds, `Monetary Policy: Rules and Transmission Mechanisms', Vol. 4, Central Bank of Chile, chapter 9, pp. 247-274.
Clarida, R., Gali, J. & Gertler, M. (1998), Monetary policy rules in practice some international evidence, European Economic Review 42(6), 1033-1067.
Crowe, C. & Meade, E. (2007), The evolution of central bank governance around the world, Journal of Economic Perspectives 69-90.(4), 69-90.
D'amato, M., Pistoresi, B. & Salsano, F. (2009), On the determinants of central bank independence in open economies, International Journal of Finance and Economics 14(2), 107-119.
De Haan, J. & Klomp, J. (2010), Inflation and central bank independence: a meta-regression analysis, Journal of Economic Surveys 24(4), 593-621.
Dennis, R. (2006), The policy preferences of the us federal reserve', Journal of Applied Econometrics 21(1), 55-77.
Eijffinger, S. & De Haan, J. (1996), The political economy of central bank independence, Special Papers in International Economics (19), Department of Economics, Princeton University.
Eijffinger, S. & Hoeberichts, M. (1998), The trade-off between central bank independence and conservativeness, Oxford Economic Papers (50), 397-411.
Eijffinger, S. & Hoeberichts, M. (2008), The trade-off between central bank independence and conservativeness in a new keynesian framework, European Journal of Political Economy 24(4), 742-747.
Farvaque, E. (2002), Political determinants of central bank independence, Economics Letters 77(1), 131-135.
Favero, C. A. & Rovelli, R. (2003), Macroeconomic stability and the preferences of the FED: A formal analysis, 1961-98, Journal of Money, Credit and Banking 35(4), 545-556.
Hayo, B. & Hefecker, C. (2002), Reconsidering central bank independence, European Journal of Political Economy 18(4), 653-674.
Hughes Hallett, A. & Weymark, D. (2005), Independence before conservatism: Transparency, politics, and central bank design, German Economic Review (6), 1-21.
Jondeau, E. & Le Bihan, H. (2002), Evaluating monetary policy rules in estimated forward-looking models: A comparison of us and german monetary policies, Annales d'Economie et de Statistiques 67-68, 357-388.
King, M. (1997), Changes in UK monetary policy: Rules and discretion in practice, Journal of Monetary Economics 39(1), 81-97.
Krause, S. & Méndez, F. (2005), Policy makers' preferences, party ideology and the political business cycle, Southern Economic Journal 71(4), 752-767.
Krause, S. & Méndez, F. (2008), Institutions, arrangements and preferences for inflation stability: Evidence and lessons from a panel data analysis, Journal of Macroeconomics 30(1), 282-307.
Lippi, F. (1999), Central Bank Independence, Targets and Credibility: Political and Economic Aspects of Delegation Arrangements for Monetary Policy, Edward Elgar Publishing Ltd.
Mojon, B. & Peersman, G. (2001), A var description of the effects of monetary policy in the individual countries of the euro area, ECB Working Paper (92).
Ozlale, U. (2003), Price stability vs. output stability: tales of federal reserve administrations, Journal of Economic Dynamics & Control 27(3), 1595-1610.
Rogoff, K. (1985), The optimal degree of commitment to an intermediate monetary target, Quarterly Journal of Economics 100(4), 1169-1190.
Salemi, M. (1995), Revealed preference of the federal reserve: Using inverse-control theory to interpret the policy equation of a vector autoregression, Journal of Business & Economic Statistics 13(4), 419-433.
Siklos, P. L. (2002), The Changing Face of Central Banking, Evolutionary Trends Since World War II, Cambridge University Press.
Svensson, L. E. (2000), Open-economy inflation targeting, Journal of International Economics 50(1), 155-183.
Tachibana, M. (2004), Central banks' preferences in Japan, the U.K., and the U.S., Japan and the World Economy (16), 81-93.
Taylor, J. (1979), Estimation and control of a macroeconomic model with rational expectations, Econometrica 47(5), 1267-1286.
Weymark, D. (2007), Inflation, government transfers, and optimal central bank independence, European Economic Review 51(2), 297-315.
Woodford, M. (2003), Interest and Prices, Foundations of a theory of Monetary Policy, Princeton University Press.