Published on 01/28/2020
The Taylor rule provides a natural paragon of short-term nominal interest rates, albeit one that is subject to considerable uncertainty. This post quantifies this uncertainty and shows how this quantification contributes to monetary policy assessment. It shows that, in 2019, short-term interest rates in the euro area were close to the middle of the benchmark interval thus obtained.
Chart 1: Distribution of Taylor rates, 2015-2019 Sources: Eurostat and author’s calculations. Note: The pink areas, from the darkest to the lightest, indicate the 50%, 70%, 80%, 90% and 95% confidence intervals of Taylor rates.
Updated on 02/14/2020 17:07