An Empirical Analysis of the Taylor Rule and its Application to Monetary Policy: A Case for the United Kingdom and Euro Area


Keshab Bhattarai, Matthew Carter

Abstract


This paper analyses the Taylor rule and its application to monetary policy in the United Kingdom and Euro area. The analysis uses a linear regression on quarterly economic data from 1993Q1 to 2017Q4 for the United Kingdom and 2000Q1 to 2016Q4 for the Euro area. The results show that the Taylor rule does not fully describe the monetary policy actions made by the Bank of England and European Central Bank over the period analysed; and, that both central banks engage in a significant level of interest rate smoothing. The results also suggest that the Taylor rule does not provide the rationale for quantitative easing within the two regions and that interest rates should be higher than they currently are.

Keywords


Interest rate rule, Taylor rule, Monetary policy, United Kingdom, Euro area.

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About this article

Title

An Empirical Analysis of the Taylor Rule and its Application to Monetary Policy: A Case for the United Kingdom and Euro Area

Keywords

Interest rate rule, Taylor rule, Monetary policy, United Kingdom, Euro area.

DOI

10.20448/journal.501.2018.52.173.182

Date

2018-09-10

Additional Links

Manuscript Submission

Journal

Asian Journal of Economics and Empirical Research
Vol 5, No 2 (2018) Page: 173-182

Print ISSN

2518-010X

Online ISSN

2409-2622

Statistics

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Citations

0

Authors & Affiliations

Keshab Bhattarai
The Business School, University of Hull, Cottingham Road, Hull, HU6 7RX, United Kingdom
United Kingdom

Matthew Carter
The Business School, University of Hull, Cottingham Road, Hull, HU6 7RX
United Kingdom


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Asian Journal of Economics and Empirical Research

 Online ISSN: 2409-2622 | Print ISSN: 2518-010X

 

 

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