TY - JOUR

T1 - Explaining Disagreement on Interest Rates in a Taylor-Rule Setting

AU - Dräger, Lena

AU - Lamla, Michael J

PY - 2017/10

Y1 - 2017/10

N2 - Most studies on disagreement focus on one specific variable, thereby neglecting the fact that disagreement can be co‐moving with disagreement on other variables. In this paper, we explore to what extent disagreement regarding the interest rate is driven by disagreement on inflation and unemployment. This relationship can be motivated by the theoretical concept of the Taylor rule. Using survey microdata for both professional forecasters and consumers, we provide evidence that disagreement on the interest rate is mainly driven by disagreement on inflation. We further show that disagreement is significantly influenced by central bank transparency, as well as news on money and credit conditions.

AB - Most studies on disagreement focus on one specific variable, thereby neglecting the fact that disagreement can be co‐moving with disagreement on other variables. In this paper, we explore to what extent disagreement regarding the interest rate is driven by disagreement on inflation and unemployment. This relationship can be motivated by the theoretical concept of the Taylor rule. Using survey microdata for both professional forecasters and consumers, we provide evidence that disagreement on the interest rate is mainly driven by disagreement on inflation. We further show that disagreement is significantly influenced by central bank transparency, as well as news on money and credit conditions.

KW - Economics

KW - Inflation expectations

KW - interest-rate expectations

KW - survey microdata

KW - taylor rule

KW - unemployment expectations

UR - http://www.scopus.com/inward/record.url?scp=85032513984&partnerID=8YFLogxK

U2 - 10.1111/sjoe.12217

DO - 10.1111/sjoe.12217

M3 - Journal articles

VL - 119

SP - 987

EP - 1009

JO - The Scandinavian Journal of Economics

JF - The Scandinavian Journal of Economics

SN - 0347-0520

IS - 4

ER -