English, Article, Journal or magazine article edition: Comment on ``Interest Rate Setting and Inflation Targeting: Evidence of a Nonlinear Taylor Rule for the United Kingdom'' Zisimos Koustas; Jean-Francois Lamarche

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Bookmark: http://trove.nla.gov.au/version/139835
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Comment on ``Interest Rate Setting and Inflation Targeting: Evidence of a Nonlinear Taylor Rule for the United Kingdom''
Author
  • Zisimos Koustas
  • Jean-Francois Lamarche
Physical Description
  • preprint
Notes
  • This paper revisits the results of Taylor and Davradakis (2006) which suggest that the Bank of England has followed a nonlinear Taylor rule in setting the short-term interest rate. Implementing the methodology of Caner and Hansen (2004) that deals with instrumental-variables estimation of threshold models and provides estimators with known and desirable properties, we obtain a reversal of their results. Our results based on an appropriate estimation strategy suggest a linear rule. The intuitive nonlinearity test proposed by Caner and Hansen (2004) was developed with dynamic panel models in mind but can be extended to time series models and fits nicely in the context of Taylor and Davradakis (2006).
  • Thresholds, Nonlinear Models, Instrumental Variables, Taylor Rule
  • RePEc:brk:wpaper:0903
Language
  • English
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