David R. Hakes

Monetary policy as a decision-making hierarchy: The case of Taiwan

Abstract We apply a threshold autoregressive model to a reaction function of the central bank of Taiwan to see if it responds differently to its policy objectives when the severity of inflation differs. We locate three thresholds and thus four inflation regimes. In the regime with essentially no inflation, the central bank responds to both output and inflation. In the low inflation regime, it responds countercyclically to output, but shows no response to inflation. In the moderate and high inflation regimes, it increasingly responds to inflation, but not to output. Our results of an asymmetric policy response are consistent with the central banks public statements.

Time-Varying Response of Monetary Policy to Macroeconomic Conditions

We reject the hypothesis that the Federal Reserve’s response to the macroeconomy over the period of 1953–1994 can be accurately represented with a fixed-parameter discrete choice model. Thus, we model the Fed’s time-varying response with a nonlinear Kalman filter. The estimated time paths of the reaction function coefficients suggest that the Fed has responded countercyclically to movements in the price level except for the middle 1970s when it accommodated inflation. The Fed has generally responded countercyclically to unemployment and output during recessions. However, it has not maintained a countercyclical policy during nonrecessionary times until the 1980s.

Do shifts in federal reserve policy regimes explain interest rate anomalies

Abstract In October 1979 and October 1982 the Federal Reserve announced changes in operating procedures. Recent research suggests that unusual interest rate movements began prior to October 1979 and extend beyond October 1982, and thus, the changes in operating procedures may not be the primary source of these interest rate anomalies. We unexpectedly find support for this conclusion. We defined regime shifts as changes in the Feds respose errant money growth, and we find that the Feds response to errant money growth is not correlated with the unusual interest rate movements during this period.