Paradiso, Antonio and Rao, B. Bhaskara (2011): The effects of Minsky moment and stock prices on the US Taylor Rule.

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Abstract
This paper estimates the US Taylor rule for the period 1997 – 2010, with monthly data, a period characterized by two recessions and asset markets turbulences. Its novelties are that, firstly, we follow Weise and Barbera (2009) and include in the Taylor rule credit spreads (a variable which captures the socalled Minsky Moment) and a modified Wicksellian neutral interest rate. Secondly, we also include a variable to capture the effects of stock price movements. Thirdly, we find that all the variables in the US Taylor rule are I(1) in levels. Therefore, we estimate this equation with the time series methods of unit roots and cointegration, which is perhaps a novelty for the US Taylor rule. We find that there is a well defined cointegrating equation for the US Taylor rule embodying WicksellianMinsky effects and stock market movements. Secondly, the Federal Reserve system seems to give relatively a much larger weight to the objective of controlling inflation than to output and unemployment.
Item Type:  MPRA Paper 

Original Title:  The effects of Minsky moment and stock prices on the US Taylor Rule 
Language:  English 
Keywords:  Taylor rule, Minsky Moment, Wicksellian interest rate, Stock prices, Cointegration 
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 C  Mathematical and Quantitative Methods > C2  Single Equation Models ; Single Variables > C22  TimeSeries Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes 
Item ID:  27840 
Depositing User:  Antonio Paradiso 
Date Deposited:  03. Jan 2011 19:50 
Last Modified:  25. Feb 2013 17:40 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/27840 