Interest rate predictability debunked: Taylor rule fails to forecast changes.
The study looked at how well interest rate changes can be predicted using a common economic model called the Taylor rule. By analyzing different variables like inflation and the output gap, the researchers found that while it's easy to predict the factors in the model, it's actually very difficult to predict interest rate changes themselves. This suggests that there may be other factors at play in monetary policy that the Taylor rule doesn't account for.