Abstract
This paper uses a modified New Keynesian framework to consider the use of monetary information in making monetary policy decisions. We add monetary indicators derived from theoretical models to conventional economic variables in an instrument rule and estimate the equations using euroarea and UK data recognizing that interest rates are set discretely. There is an improvement in the ability to predict changes in interest rates when we introduce monetary indicators which is robust to alternative model specifications. This result adds to a growing literature on the role of monetary indicators showing that this information helps predict interest rate decisions as well as inflation.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: 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.