A regime-switching approach to estimating the nonlinear quantity-based monetary policy rule in China

2016 ◽  
Vol 24 (2) ◽  
pp. 132-135
Author(s):  
Xu Zhang ◽  
Xiaoxing Liu ◽  
Jianqin Hang ◽  
Dengbao Yao
2006 ◽  
Vol 96 (1) ◽  
pp. 54-81 ◽  
Author(s):  
Christopher A Sims ◽  
Tao Zha

A multivariate regime-switching model for monetary policy is confronted with U.S. data. The best fit allows time variation in disturbance variances only. With coefficients allowed to change, the best fit is with change only in the monetary policy rule and there are three estimated regimes corresponding roughly to periods when most observers believe that monetary policy actually differed. But the differences among regimes are not large enough to account for the rise, then decline, in inflation of the 1970s and 1980s. Our estimates imply monetary targeting was central in the early 1980s, but also important sporadically in the 1970s.


2018 ◽  
Vol 53 (6) ◽  
pp. 2559-2586 ◽  
Author(s):  
Jian Hua ◽  
Liuren Wu

A major issue with predicting inflation rates using predictive regressions is that estimation errors can overwhelm the information content. This article proposes a new approach that uses a monetary-policy rule as a bridge between inflation rates and short-term interest rates and relies on the forward-interest-rate curve to predict future interest-rate movements. The 2-step procedure estimates the predictive relation not through a predictive regression but far more accurately through the contemporaneous monetary-policy linkage. Historical analysis shows that the approach outperforms random walk out of sample by 30%–50% over horizons from 1 to 5 years.


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