Abstract
This paper presents a methodology to estimate an asymmetric probability density function for a forward-looking version of the Taylor interest rate, assuming that not only the explanatory variables but also the parameters of the rule are random variables. The methodology allows for correlation across different sources of uncertainty and the resulting distribution for the Taylor interest rate is obtained by numerical simulation, avoiding any assumption concerning the aggregation of non-normal distributions. The paper presents an application for the euro area as a whole. The main conclusion is that the uncertainty surrounding the Taylor interest rate could be high, i.e. the confidence intervals could be too wide to give clear indications concerning the evolution of interest rates.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
