Historical Analysis of Monetary Policy Reaction Functions: Do Real-Time Data Matter?
|Year of publication||2014|
|Type||Article in Periodical|
|Magazine / Source||Finance a úvěr|
|MU Faculty or unit|
|Keywords||real-time data;revision;DSGE model;Bayesian estimation;recursive estimation|
|Description||This paper investigates the differences between parameter estimates of monetary policy reaction functions using real-time data and those using revised data. The model is a New Keynesian DSGE model of the Czech, Hungarian and Polish small open economies in interaction with the euro area. Unlike the related literature, this paper uses separate vintages of real-time data for all successive estimations. The paper reports several statistically significant differences between parameter estimates of monetary policy reaction functions based on real-time data and those based on revised data. The parameter whose estimate is the most affected by the usage of real-time data is preference for output growth. This result is common across the countries in the study. The results suggest that real-time data matter when conducting a historical analysis of monetary policy preferences.|