Nebot, C. (UPCT-CUD, San Javier, Murcia), García-Solanes, J. (U. de Murcia) and Beyaert, A. (U. de Murcia)- New insights into the nonlinearity of the ECB Taylor Rule

Información (pendiente de confirmación)

  • Ponente: César Nebot
  • Fecha: 06/jul/2018 - 12:00 horas
  • Lugar: Seminario de Fundamentos del Análisis Económico, aula B2/02

Abstract

We apply a nonparametric procedure, Multiple Adaptive Regression Splines (MARS), to endogenously select the best multiple threshold model for the European Central Bank (ECB) Taylor Rule (TR). MARS offers the advantage of not excluding simpler models if they better t the data. On monthly data from 1/2000 to 9/2016, the TR exhibits thresholds for both the output gap and inflation, and uncover interesting information about the different sensitivity of the ECB to each variable. We conclude that the ECB cares more about the economic activity than officially declared and reacts to inflation deviations only if they sufficiently exceed the official 2% target. We also detect an overall shift in the monetary policy during the 2008 financial crisis that pushed the system towards the Zero Lower Bound (ZLB). We reach a more complete description of the ECB TR than published so far.

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