Template-type: ReDIF-Paper 1.0
Author-Name: J. A. Lafuente
Author-Workplace-Name: Universitat Jaume I
.

Author-Name:
 R. Pérez
Author-Workplace-Name:
 Universidad Complutense and ICAE.
Author-Name: J. Ruiz
Author-Workplace-Name: Universidad Complutense and ICAE.

Title: Disentangling permanent and transitory monetary shocks with a non-linear Taylor rule
Abstract: This paper provides an estimation method to decompose monetary policy innovations into persistent and transitory components using the non-linear 
	Taylor rule proposed in Andolfatto et al. [Journal of Monetary Economics 55 (2008) 406–422]. In order to use the Kalman filter as the optimal signal 
	extraction technique we use a convenient reformulation for the state equation by allowing expectations play in significant role in explaining the 
	future time evolution of monetary shocks. This alternative formulation allows us to perform the maximum likelihood estimation for all the parameters 
	involved in the monetary policy. Empirical evidence on US monetary policy making is provided for the period 1980-2011. We compare our empirical 
	estimates with those obtained based on the particle filter. While both procedures lead to similar quantitative and qualitative findings, our approach 
	has much less computational cost.
Classification-JEL: C22, F31.
Keywords: Monetary shocks; Kalman filter; Particle filter; Taylor rule.
Length: 23 pages 
Creation-Date: 2018-09
Number: 2018-19
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1819.txt
File-URL: https://eprints.ucm.es/id/eprint/49145/1/1819.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:1819