Kiel Working Papers, Kiel Institute for World Economics
No 1180:
Did the Bundesbank Follow a Taylor Rule? An Analysis Based on Real-Time Data
Jens R. Clausen and Carsten-Patrick Meier
Abstract: Using a real-time data set for German GDP over the period
from 1973 to 1998 we calculate various measures of real-time output gaps
and use these to calibrate and estimate Taylor-type reaction functions for
the Bundesbank. Most of the reaction functions we find fit the Bundesbank's
actual policy, as represented by the short-run interest rate, quite well.
In contrast to previous findings based on ex post revised data for the
output gap, we find the reaction coefficients to resemble quite closely
those originally proposed by Taylor for some of our realtime measures of
the output gap. Broad monetary aggregates such as M3, in contrast, only
played a small role for the Bundesbank's interest rate decisions. Given the
good record of the Bundesbank in fighting inflation, the results give
support to the use of the Taylor rule for monetary policy.
Keywords: German real-time data, output gap, monetary policy rules; (follow links to similar papers)
JEL-Codes: E52,; E32; (follow links to similar papers)
27 pages, August 2003
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