Microfoundations of a Monetary Policy Rule, Poole's Rule

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.

The Fed’s monetary policy rule

Monetary Policy and Unemployment ◽

10.4324/9780203329580_chapter_13 ◽

2010 ◽

pp. 238-251

Author(s):

Antonio Moreno

Keyword(s):

Monetary Policy ◽

Policy Rule ◽

Monetary Policy Rule

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

Applied Economics Letters ◽

10.1080/13504851.2016.1170925 ◽

2016 ◽

Vol 24 (2) ◽

pp. 132-135

Author(s):

Xu Zhang ◽

Xiaoxing Liu ◽

Jianqin Hang ◽

Dengbao Yao

Keyword(s):

Monetary Policy ◽

Regime Switching ◽

Policy Rule ◽

Monetary Policy Rule

Inflation Targeting as a Monetary Policy Rule

10.3386/w6790 ◽

1998 ◽

Cited By ~ 37

Author(s):

Lars E.O. Svensson

Keyword(s):

Monetary Policy ◽

Inflation Targeting ◽

Policy Rule ◽

Monetary Policy Rule

Nonlinearity in the Fed's monetary policy rule

Journal of Applied Econometrics ◽

10.1002/jae.792 ◽

2005 ◽

Vol 20 (5) ◽

pp. 621-639 ◽

Cited By ~ 45

Author(s):

Dong Heon Kim ◽

Denise R. Osborn ◽

Marianne Sensier

Keyword(s):

Monetary Policy ◽

Policy Rule ◽

Monetary Policy Rule