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Volume 69, Issue 3

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Forecasting ECB Policy Rates with Different Monetary Policy Rules

Belke, Ansgar; Klose, Jens

Year: 2019   Volume: 69   Issue: 3   Pages: 238-252

Abstract: This article compares two types of monetary policy rules – the Taylor-Rule and the Orphanides-Rule – with respect to their forecasting properties for the European Central Bank. In this respect the basic rules, results from estimates models and augmented rules are compared. Using quarterly real-time data from 1999 to the beginning of 2019, we find that an estimated Orphanides-Rule performs best in nowcasts, while it is outperformed by an augmented Taylor-Rule when it comes to forecasts. However, also a no-change rule delivers good results for forecasts, which is hard to beat for most policy rules.

JEL classification: E43, E52, E58, C53

Keywords: Taylor-Rule, Orphanides-Rule, Monetary Policy Rates, Forecasting, European Central Bank

RePEc: https://ideas.repec.org/a/fau/fauart/v69y2019i3p238-252.html

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