"How do we come up with a number for “A0(i-y)” (and yes Elon feel free to use this to name your next son)? There are many ways, and I will only suggest one of them here. Given that the exercise is about “shock identification”"
I laughed! It would be a shock identification indeed!
Thank you for this, Felipe - so, is the Central bank being manipulated?
"In the context of today’s post, it means that monetary policy shocks are loosely defined as any policy rate levels that can’t be explained by such rule. It means that the central bank stance is being discretionarily tighter/looser than what economic agents would expect given the rule."
By saying that the central bank is not following a Taylor rule perfectly, I am simply saying it is straying away from it, but not necessarily for bad reasons. Central bankers can and should read beyond the headline macroeconomic numbers, anticipate shifts that aren't in the data yet and act discretionarily whenever appropriate. As long as it is well argued in a policy statement, which often is, despite eventual disagreements between analysts.
Thank you for coming back so quickly. Interesting. I guess that only time will tell what the outcome will be. April 1st will definitely be a 'shock' when Trump escalates these tarriffs and when the unemployment figures start to come in along with the results of the ending of Social Security payments. I can only guess that the bankers are hoping that things level out before they have to take action which will have repurcussions on other banks and financial institutions?
"How do we come up with a number for “A0(i-y)” (and yes Elon feel free to use this to name your next son)? There are many ways, and I will only suggest one of them here. Given that the exercise is about “shock identification”"
I laughed! It would be a shock identification indeed!
Thank you for this, Felipe - so, is the Central bank being manipulated?
"In the context of today’s post, it means that monetary policy shocks are loosely defined as any policy rate levels that can’t be explained by such rule. It means that the central bank stance is being discretionarily tighter/looser than what economic agents would expect given the rule."
Hi, thanks for the kind comment.
By saying that the central bank is not following a Taylor rule perfectly, I am simply saying it is straying away from it, but not necessarily for bad reasons. Central bankers can and should read beyond the headline macroeconomic numbers, anticipate shifts that aren't in the data yet and act discretionarily whenever appropriate. As long as it is well argued in a policy statement, which often is, despite eventual disagreements between analysts.
Thank you for coming back so quickly. Interesting. I guess that only time will tell what the outcome will be. April 1st will definitely be a 'shock' when Trump escalates these tarriffs and when the unemployment figures start to come in along with the results of the ending of Social Security payments. I can only guess that the bankers are hoping that things level out before they have to take action which will have repurcussions on other banks and financial institutions?
In other words, they don't want to 'scare the [financial] horses'?
Not sure about the financial horses there but if you like some content on tariffs there's certainly something for you in my previous post.