tag:blogger.com,1999:blog-5970717323327554723.post1431444420757691873..comments2023-09-08T04:48:35.871-07:00Comments on Shock Minus Control: Dr. Taylor’s Monetary TonicMaggie Mayhttp://www.blogger.com/profile/08822013439171121624noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-5970717323327554723.post-83430697354171455562008-12-12T04:33:00.000-08:002008-12-12T04:33:00.000-08:00My knee-jerk reaction on simple Taylor Rules for C...My knee-jerk reaction on simple Taylor Rules for Canada is: "What about the exchange rate?" (I'm the last living MCI guy.) When I played with this stuff in the past, I convinced myself that the y/y change in the exchange rate belongs in the reaction function. It's not obvious that including the exchange rate will fix that graph, but it's probably worth a shot.<BR/><BR/>But then those real time vs final revised numbers for potential output are also a big problem. Simon Van Norden told me, IIRC, that they have little relation to each other. That's why I like the unemployment rate instead, since it's real time data.<BR/><BR/>It's interesting to compare those two dotted lines on the graph. I'm going to make my forecast now: your "guess" will beat the Bank's guess.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-5970717323327554723.post-88931987748359832942008-12-11T19:58:00.000-08:002008-12-11T19:58:00.000-08:00The dotted line is my forecast (read: guess) for v...The dotted line is my forecast (read: guess) for values of the output and inflation gap over the next 4 quarters.<BR/><BR/>I meant to plug in the BoC forecast to show the implication for a Taylor rule, but my my train ride to work ended before I had the chance. Perhaps i'll update it tonight.<BR/><BR/>Interesting that the fit is so poor prior to 2003 - any guesses as to why?Maggie Mayhttps://www.blogger.com/profile/08822013439171121624noreply@blogger.comtag:blogger.com,1999:blog-5970717323327554723.post-29146884770508460602008-12-11T17:31:00.000-08:002008-12-11T17:31:00.000-08:00Where did you get that dotted line from? Was it fr...Where did you get that dotted line from? Was it from the Bank's own forecasts of output and inflation, plugged into the estimated reaction function?<BR/><BR/>Trouble is with those estimated Taylor rules, the real time output gap figures are very different from the final revised figures, I have heard.<BR/><BR/>You know, it seems to fit quite well from about 2003 on, but badly before that.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.com