Publication detail

Time-Varying Neutral Policy Rate in Real Time: A Predictor of Future Inflation?

Author(s): prof. Roman Horváth Ph.D.,
Type: Others
Year: 2007
Number: 0
ISSN / ISBN:
Published in: Czech National Bank working paper, No. 4/2007
Publishing place:
Keywords: policy neutral rate, Taylor rule, time-varying parameter model with endogenous regressors
JEL codes:
Suggested Citation:
Abstract: This paper examines time-varying policy neutral interest rate in real time for the Czech Republic in 2001:1-2006:09 estimating various specifications of simple Taylor-type monetary policy rules. For this reason, we apply a structural time-varying parameter model with endogenous regressors. The results indicate that policy neutral rate gradually decreased over sample period to the levels comparable to those of in the euro area. Next, we propose a measure of monetary policy stance based on a deviation of the actual interest rate from the estimated policy neutral rate and find it a useful predictor of the level as well as change of future inflation rate.

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