Estimating Monetary Policy Reaction Functions Using Quantile Regressions

MPRA Paper from University Library of Munich, Germany

Abstract: Monetary policy rule parameters are usually estimated at the mean of the interest rate distribution conditional on inflation and an output gap. This is an incomplete description of monetary policy reactions when the parameters are not uniform over the conditional distribution of the interest rate. I use quantile regressions to estimate parameters over the whole conditional distribution of the Federal Funds Rate. Inverse quantile regressions are applied to deal with endogeneity. Realtime data of inflation forecasts and the output gap are used. I find significant and systematic variations of parameters over the conditional distribution of the interest rate.

Keywords: monetary policy rules; IV quantile regression; real-time data (search for similar items in EconPapers)
JEL-codes: C14 E52 E58 (search for similar items in EconPapers)
Date: 2010-07-13
New Economics Papers: this item is included in nep-cba and nep-mon
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Estimating monetary policy reaction functions using quantile regressions (2012)
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