Ruhr Economic Papers

Ruhr Economic Papers #815

Forecasting ECB Policy Rates with Different Monetary Policy Rules

by Ansgar Belke and Jens Klose

UDE, 07/2019, 23 S./p., 8 Euro, ISBN 978-3-86788-944-5 DOI: 10.4419/86788944



This article compares two types of monetary policy rules – the Taylor-Rule and the Orphanides-Rule – with
respect to their forecasting properties for the policy rates of the European Central Bank. In this respect the basic rules, results from estimated models and augmented rules are compared. Using quarterly real-time data from 1999 to the beginning of 2019, we find that an estimated Orphanides-Rule performs best in
nowcasts, while it is outperformed by an augmented Taylor-Rule when it comes to forecasts. However, also a no-change rule delivers good results for forecasts, which is hard to beat for most policy rules.

JEL-Classification: E43, E52, E58, C53

Keywords: Taylor-Rule; Orphanides-Rule; monetary policy rates; forecasting, European Central Bank