Risk management-driven policy rate gap

Giovanni Caggiano, Efrem Castelnuovo, Gabriela Nodari

Research output: Contribution to journalArticleResearchpeer-review

11 Citations (Scopus)


We employ real-time data available to the US monetary policy makers to estimate a Taylor rule augmented with a measure of financial uncertainty over the period 1969–2008. We find evidence in favor of a systematic response to financial uncertainty over and above that to expected inflation, output gap, and output growth. However, this evidence regards the Greenspan–Bernanke period only. Focusing on this period, the ”risk-management” approach is found to be responsible for monetary policy easings for up to 75 basis points of the federal funds rate.

Original languageEnglish
Pages (from-to)235-238
Number of pages4
JournalEconomics Letters
Publication statusPublished - 1 Oct 2018


  • Monetary policy
  • Real-time data
  • Risk management-driven policy rate gap
  • Taylor rules
  • Uncertainty

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