Augmenting the Taylor Rule: Monetary Policy and the Bond Market
Posted: 29 May 2016
Date Written: May 26, 2016
Abstract
I show that augmenting the Taylor rule with bond yields observed at the start of the quarter significantly improves the in-sample and out-of-sample t. Moreover, the augmented rule produces lower forecast errors than those of linear and non-linear policy models.
Keywords: Taylor rule, monetary policy, yield curve, principal components
JEL Classification: G9, G12, E52
Suggested Citation: Suggested Citation
Roskelley, Kenneth, Augmenting the Taylor Rule: Monetary Policy and the Bond Market (May 26, 2016). Economics Letters, Vol. 144, No. July, 2016, Available at SSRN: https://ssrn.com/abstract=2785020
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