Economics, Econometrics and Finance
4 years ago

Lagged interest rates crucial in predicting Federal Reserve's actions.

SSRN Electronic Journal
Describing the Fed's Conduct with Taylor Rules: Is Interest Rate Smoothing Important?
Efrem Castelnuovo

Paper Summary

Related papers

Economics, Econometrics and Finance
3 years ago

ECB and Fed Interest Rates Aligned with Simple Rule, Impact Revealed.

Macroeconomic Analysis
Eurozone Crisis
2 views
Economics, Econometrics and Finance
4 years ago

ECB sets interest rates much lower than suggested by Taylor rule.

Eurozone Crisis
Macroeconomic Trends
1 view
Economics, Econometrics and Finance
4 years ago

Central banks adopt 'wait-and-see' approach for optimal interest rate changes

Macroeconomic Analysis
Monetary Models
Real Options
1 view

The study looked at how the Federal Reserve sets interest rates using Taylor rules, focusing on interest rate smoothing. By analyzing different models, the researchers found that the lagged interest rate plays a significant role in determining the federal funds rate path. This suggests that past interest rates influence current decisions, along with other factors like preferences on the output gap and financial market indicators. While policy shocks may also impact interest rates, the study highlights the importance of considering the lagged interest rate in Taylor-type models.