Over the last 25 years, there has been renewed interest in how Central Banks set interest rates, whether it be through a simple Taylor (1993) rule, where the interest rate that is set is a function of the forward-looking output gap and inflation differential, or a McCallum (1988, 1994) rule, where the change in the money base is targeted as a function of the velocity of money and a nominal output gap. Typically, these rules are set in a linear framework, where the aggregate supply curve (or Phillips curve) is assumed to be linear. However, in reality, the interest rate setting behaviour of the Central Bank may be nonlinear or asymmetric for a variety of reasons, such as a greater aversion to positive inflation differentials than to negative ones, or be forced to mitigate the output gap as a result of the political demands of the Government. The objective of this Doctoral dissertation will be to explore the nature and conduct of how the Reserve Bank of Australia (RBA), the European Central Bank (ECB), and the Federal Reserve Bank of the United States (Fed), have implemented monetary policy over the last quarter of a century. In particular, this dissertation will analyse whether these Central Banks have set monetary policy using simple (Taylor and/or McCallum) linear interest rate rules, or (Taylor and/or McCallum) nonlinear interest rate rules, using sophisticated econometric techniques.
This project lies in the ‘Innovation, Performance and Governance’ research priority area within the ‘Global Business Innovation’ Enabling Capability Platform.
Higher Degree by Research (HDR) Program
School: EFM Program Name(s) and Codes : PhD (EFM), DR203
Potential Supervisory Team
Associate Professor George Tawadros (Primary Supervisor) Professor Imad Moosa (Secondary Supervisor) Dr Ankita Mishra (Secondary Supervisor)
Academic Enqiury Contact
HDR Coordinator details: Associate Professor Peter Sivey, HDR Coordinator for the School of Economics Finance and Marketing RMIT University [email protected] +61 (3) 99251321