A1139
Title: Hawks, doves and asymmetry in US monetary policy: Evidence from a dynamic quantile regression model
Authors: Yongcheol Shin - University of York (United Kingdom) [presenting]
Abstract: The aim is to develop a quantile error correction representation of US monetary policymaking over the period 1964q to 22007q2. The model is unique as it is capable of simultaneously modelling three distinct forms of asymmetry: long-run (reaction) asymmetry, short-run (adjustment) asymmetry, and quantile-specific (locational) asymmetry. Results reveal that: (i) the reaction function is linear in both output and inflation gaps in the lower conditional quantiles of the interest rate and that the Taylor principle is not upheld; (ii) in the mid quantiles, the reaction function exhibits a good performance bias whereby the Taylor principle is observed for positive inflationary shocks only; and (iii) no stable long-run relationship is observed in the upper quantiles. This final result is interpreted in terms of a modified Goodhart's Law, whereby excessive policy aggression undermines observed empirical regularities.
