Publication detail

Estimating Time-Varying Policy Neutral Rate in Real Time

Author(s): prof. Roman Horváth Ph.D.,
Type: IES Working Papers
Year: 2007
Number: 1
Published in: IES WP
Publishing place: Praha
Keywords: policy neutral rate, Taylor rule, time-varying parameter model with endogenous regressors.
JEL codes: E43, E52, E58
Suggested Citation: Horváth, R. (2007). “ Estimating Time-Varying Policy Neutral Rate in Real Time. ” IES Working Paper 1/2007. IES FSV. Charles University.
Grants: IES Research Framework Institutional task (2005-2011) Integration of the Czech economy into European union and its development
Abstract: This paper examines policy neutral rate in real time for the Czech Republic in 2001:1-2006:09 estimating various specifications of simple Taylor-type monetary policy rules. First, we estimate it using GMM. Second, we apply a structural time-varying parameter model with endogenous regressors to evaluate the fluctuations of policy neutral rate over time. The results suggest that there is substantial interest rate smoothing and central bank primarily responds to inflation (forecast) developments. The estimated parameters seem to sustain the equilibrium determinacy. We find that the policy neutral rate gradually decreased over sample period to the levels comparable to those of in the euro area reflecting capital accumulation, smaller risk premium, equilibrium exchange rate appreciation as well as successful disinflation in the Czech economy.
Downloadable: WP 2007_1 Horvath




Patria Finance