Meta Taylor Rules for the UK and Australia; Accommodating Regime Uncertainty in Monetary Policy Analysis Using Model Averaging Methods

Abstract

This paper provides a characterization of UK and A ustralian monetary policy within a T aylor rule framework, accommodating uncertainties about the nature and duration of policy regimes in a flexible but easy‐to‐implement analysis. Our approach involves estimation and inference based on a set of T aylor rules obtained through linear regression methods, but combined into a ‘meta’ rule using model averaging techniques. Using data that were available in real time, the estimated version of the meta T aylor rule provides a useful and detailed characterization of monetary policies in the UK and A ustralia over the last 30 years.