Monetary Policy Analysis in Real-Time: Vintage Combination from a Real-Time Dataset

39 Pages Posted: 19 Mar 2011

See all articles by Carlo Altavilla

Carlo Altavilla

European Central Bank (ECB)

Matteo Ciccarelli

European Central Bank (ECB)

Date Written: March 14, 2011

Abstract

This paper provides a general strategy for analyzing monetary policy in real time which accounts for data uncertainty without explicitly modelling the revision process. The strategy makes use of all the data available from a real-time data matrix and averages model estimates across all data releases. Using standard forecasting and policy models to analyze monetary authorities’ reaction functions, we show that this simple method can improve forecasting performance and provide reliable estimates of the policy model coefficients associated with small central bank losses, in particular during periods of high macroeconomic uncertainty.

Keywords: monetary policy, Taylor rule, real-time data, great moderation, forecasting

JEL Classification: E520, E580, C320, C530, C820

Suggested Citation

Altavilla, Carlo and Ciccarelli, Matteo, Monetary Policy Analysis in Real-Time: Vintage Combination from a Real-Time Dataset (March 14, 2011). CESifo Working Paper Series No. 3372, Available at SSRN: https://ssrn.com/abstract=1785284

Carlo Altavilla (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Matteo Ciccarelli

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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