Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5058036 | Economics Letters | 2016 | 4 Pages |
Abstract
â¢I augment the Taylor rule using principal components constructed from bond yields.â¢The principal components improve the Taylor rule's in-sample and out-of-sample fit.â¢The fit improves for both linear and threshold Taylor rules.
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 fit. Moreover, the augmented rule produces lower forecast errors than those of linear and non-linear policy models.
Related Topics
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Authors
Kenneth D. Roskelley,