Monetary Policy Rules with PID Control Features: Evidence from the UK, USA and EU

Shepherd, D., Muñoz Torres, R.I. and Saridakis, G. 2019. Monetary Policy Rules with PID Control Features: Evidence from the UK, USA and EU. International Review of Applied Economics. Advanced online publication. doi:10.1080/02692171.2019.1585766

TitleMonetary Policy Rules with PID Control Features: Evidence from the UK, USA and EU
TypeJournal article
AuthorsShepherd, D., Muñoz Torres, R.I. and Saridakis, G.
Abstract

This paper considers the extent to which the monetary policy operations of three major central banks
can be regarded as an application of Proportional-Integral-Derivative (PID) control rules. The paper
outlines the general PID framework and estimates a series of dynamic models to identify how interest
rate policy adjustments are affected by the rate of inflation and the level of macroeconomic activity.
The paper examines data for the UK, the USA and the Eurozone. The results suggest that the PID
rules can provide a useful theoretical and empirical framework for estimating central bank responses
to the inflation and macroeconomic activity variables by improving the explanatory power of the
Taylor rule model and determining the effect of the parameters.

KeywordsMonetary Policy Rules
Taylor Rules
Feedback Control
PID Control Rules
Article numberCIRA-2018-0245
JournalInternational Review of Applied Economics
ISSN0269-2171
Year2019
PublisherTaylor & Francis
Digital Object Identifier (DOI)doi:10.1080/02692171.2019.1585766
Publication dates
Published online16 Apr 2019

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