Financial Variables in a Policy Rule: Does It Bring Macroeconomic Benefits?
The result's identifiers
Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11230%2F19%3A10394417" target="_blank" >RIV/00216208:11230/19:10394417 - isvavai.cz</a>
Result on the web
<a href="https://verso.is.cuni.cz/pub/verso.fpl?fname=obd_publikace_handle&handle=EOtHWUuY3I" target="_blank" >https://verso.is.cuni.cz/pub/verso.fpl?fname=obd_publikace_handle&handle=EOtHWUuY3I</a>
DOI - Digital Object Identifier
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Alternative languages
Result language
angličtina
Original language name
Financial Variables in a Policy Rule: Does It Bring Macroeconomic Benefits?
Original language description
The main aim of this research is to find whether direct incorporation of the financial variables in the monetary policy rule can bring macroeconomic benefits in terms of lower volatility of inflation and output. This paper sheds light on the performance of the augmented Taylor rules with financial variables in a small open economy. For this purpose, a New Keynesian DSGE model with two types of financial frictions is constructed. This work provides three conclusions. First, incorporation of asset prices in the monetary policy rule can be beneficial for macroeconomic stabilisation in terms of lower implied volatilities of inflation and output in the response to certain domestic shocks. Second, the usefulness of the augmented monetary policy rule with asset prices deteriorates in case of the shocks originating abroad. The most favourable results as a response to foreign shocks delivers the rule accounting for movements in inflation and output, since this rule can accommodate foreign first-round effects. Third, when all shocks are set to be operative, the best performance delivers the rule accounting for movements in output.
Czech name
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Czech description
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Classification
Type
J<sub>imp</sub> - Article in a specialist periodical, which is included in the Web of Science database
CEP classification
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OECD FORD branch
50201 - Economic Theory
Result continuities
Project
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Continuities
S - Specificky vyzkum na vysokych skolach
Others
Publication year
2019
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů
Data specific for result type
Name of the periodical
Finance a úvěr
ISSN
0015-1920
e-ISSN
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Volume of the periodical
69
Issue of the periodical within the volume
2
Country of publishing house
CZ - CZECH REPUBLIC
Number of pages
27
Pages from-to
122-148
UT code for WoS article
000466373000001
EID of the result in the Scopus database
2-s2.0-85067564241