The Taylor rule and house price uncertainty

Bruce Morley, Qijia Wei

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The aim of this article is to determine whether house price uncertainty has been an important determinant of the Taylor rule-based interest rate during the years leading up to the financial crisis. A Generalized Autoregressive Conditional Heteroskedasticity (GARCH)-based specification has been used to produce a time-varying measure of volatility, and the results indicate that it has had a significant negative effect on the interest rate, but that its addition only produces a slightly better fit to the actual interest rate.
Original languageEnglish
Pages (from-to)1449-1453
Number of pages5
JournalApplied Economics Letters
Issue number15
Publication statusPublished - 2012


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