Estimating a Taylor Rule for New Zealand With a Time-Varying Neutral Real Rate Discussion

@inproceedings{Plantier2002EstimatingAT,
  title={Estimating a Taylor Rule for New Zealand With a Time-Varying Neutral Real Rate Discussion},
  author={Christopher Plantier and Dean Scrimgeour},
  year={2002}
}
Many critics of the Taylor rule claim that it is inferior to inflation forecast based (IFB) rule because it is not forward-looking, is not aggressive enough, and because of the uncertainty surrounding the output gap. Nevertheless, the Taylor rule serves a constructive purpose because it abstracts from the Bank’s macroeconomic model, FPS, and its performance is robust across various economic models. In this light, the Taylor rule provides a useful crosscheck because the IFB rule necessarily… CONTINUE READING