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Activity Number:
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267
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Type:
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Contributed
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Date/Time:
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Tuesday, August 4, 2009 : 8:30 AM to 10:20 AM
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Sponsor:
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Business and Economic Statistics Section
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| Abstract - #303920 |
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Title:
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Modeling Monetary Policy in Real Time: Does Discreteness Matter?
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Author(s):
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Andrey Sirchenko*+
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Companies:
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European University Institute
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Address:
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Via della Piazzuola, 43, Florence, 50133, Italy
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Keywords:
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monetary policy rules ; discrete ordered choice ; real-time data ; structural change
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Abstract:
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The paper combines the use of ordered probit approach, novel real-time data set and decision-making meetings of monetary authority as a unit of observation to estimate highly systematic reaction patterns between policy rate decisions of the National Bank of Poland and incoming economic data. The study demonstrates that both the discrete-choice approach and real-time "policy-meeting" data do matter in the econometric identification of monetary policy. The study detects structural breaks in policy, which switched its focus from current to expected inflation and from exchange rate to real activity. The response to inflationary expectation is shown to be highly asymmetrical. The policy rate appears to be driven by economic indicators without evidence for intentional interest-rate smoothing. The estimated rules explain 95 percent of observed policy actions and surpass the market anticipation.
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