A Simple Empirical Measure of Central Banks' Conservatism
A Simple Empirical Measure of Central Banks' Conservatism
By Grégory Levieuge, and Yannick Lucotte
SSRN (2012)
Abstract Paper

Gregory  Levieuge

University of Orleans

France

Coder Page  

This code allows to replicate the results obtained for the United States in the corresponding paper. More precisely, it replicates the U.S. optimal monetary policy rule for 3 alternative values of λ - the preference parameter devoted to the inflation variability in equation (1): Lambda_KM, Lambda_CONS, and Lambda_CONSW. Running the code, the user will find the optimal reaction coefficients βy* and βπ* as in table 4. Moreover, the program replicates the graphs of the last plot of the figure 9, and delivers the composition of the matrices A1, A2 and B following the very first step of the program (GMM estimations), before the estimated βy and βπ in A1 are replaced by their respective optimized values. Click below for more information.
Created
April 01, 2012
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Rats 8.10
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July 23, 2012
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Abstract
In this paper we suggest a simple empirical and model-independent measure of Central Banks' Conservatism, based on the Taylor curve. This new indicator can easily be extended in time and space, whatever the underlying monetary regime of the considered countries. We demonstrate that it evolves in accordance with the monetary experiences of 32 OECD member countries from 1980, and is largely equivalent to the model-based measure provided by Krause & Méndez [Southern Economic Journal, 2005]. We finally bring forward the interest of such an indicator for further empirical analysis dealing with the preferences of Central Banks.
Levieuge, G., and Y. Lucotte, "A Simple Empirical Measure of Central Banks' Conservatism", SSRN.
Lambda_KM
Lambda_KM
Lambda_CONS
Lambda_CONS
Lambda_CONSW
Lambda_CONSW
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Please cite the publication as :

Levieuge, G., and Y. Lucotte, "A Simple Empirical Measure of Central Banks' Conservatism", SSRN.

Please cite the companion website as :

Levieuge, G., and Y. Lucotte, "A Simple Empirical Measure of Central Banks' Conservatism", RunMyCode companion website, http://www.execandshare.org/CompanionSite/Site92

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Variable/Parameters Description, constraint Comments
Lambda_KM
    Lambda_KM corresponds to the 5-year mean value of the indicator provided by Krause & Méndez (2005). Its value is 0.860 (see table 4)
    Lambda_CONS
      Lambda_CONS corresponds to the CONS index built in this paper. Its value is 0.782 (see table 4).
      Lambda_CONSW
        Lambda_CONSW corresponds to the CONS index weighted by the supply and demand shocks (see Section 5 for its formula). Its value is 0.785 (see the last column of the table 6).
        Variable/Parameters Description Visualisation
        Lambda_KM
        Lambda_CONS
        Lambda_CONSW
        A Simple Empirical Measure of Central Banks' Conservatism
        G. Levieuge (2012)
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