Estimation of a monetary policy rule

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Applied Monetary Macroeconomics

Requirements for the Term Paper

What is the purpose of the term paper?
In order to get acquainted with the conduct of empirical research you are supposed to apply some of the techniques that you have learned in class. The term paper is written on a voluntary basis. To set the right incentives, you can earn up to 20 bonus points with the term paper that will be added to the score of your final exam. This should ease the stress on the exam day. Furthermore, the term paper is a good exercise before writing a Master thesis.

Grading: 1.0: 20 points, 1.3: 18 points, 1.7: 16 points, 2.0: 14 points, 2.3: 12 points, 2.7: 10 points, 3.0: 8 points, 3.3: 6 points, 3.7: 4 points, 4.0: 2 points, 5.0: 0 points.
Deadline: The term paper needs to be handed in (via email) on Thursday, June 30, 2016 at the latest. There will be no exceptions! If you send in your term paper late you will get a grade of 5.0. Send the term paper to …..

Information for Master students:
Topic: Estimation of a monetary policy rule

Approach: Pick a country other than the US and apply what you have learned in class on monetary policy rule estimation to data from this country.

Specific tasks:
1. Pick a country and shortly describe the approach to monetary policy in this country to figure out whether the estimation of a monetary policy rule for this country makes sense.
2. Download the relevant time series for this country and prepare the data appropriately. Describe your steps and plot the time series that you are going to use for further analysis.
3. Compute an output gap series, explain how you do it and plot a graph of the series.
4. Estimate the parameters of the policy rule. Describe which estimation technique you are using and why this approach is appropriate.
5. Prepare a table with your estimation results.
6. Plot the interest rate together with fitted values from your estimation.
7. Explain and interpret your results.
Format: The term paper should consist of a maximum of 5 pages of text plus graphs (data, output gap, interest rate with fitted values), tables (estimation results) and references. Shorter term papers are ok as well. Quality is more important than quantity! References, graphs, tables and the text should be organized in a clear way. The term paper format should be similar to the format of academic articles.’

What to hand in: The term paper with the required steps, graphs and tables as listed above. Hand in the term paper in pdf format together with a zip file that contains the data and the code.
Office hours: In case you have questions talk to Inske Pirschel or Tim Schwarzm├╝ller or make an appointment for the office hour. However, the term paper should be independent work so that each student can come to the office hours one time only.
Can we work in groups? No! Each student has to hand in his or her own paper. You can and should of course discuss your approach and your results with your classmates, but each student should in the end have his or her individual results. If we see that two or more term papers contain the same or similar results or text passages, you will get a grade of 5.0.

Information for Ph.D. students:
Topic: You can either do the same tasks as the Master students in which case all of the things listed above apply. Alternatively, you can write a five page term paper (plus graphs, tables and references) on your current research. In this case you can either write a research proposal or you write about the preliminary results of your current project. The term paper should help you to make progress on your thesis and should not be an additional task that delays your work on your thesis! Before writing the term paper you should contact Maik Wolters and discuss the topic with him.
Format etc.: Same as for Master students. The paper should look like an academic article. While Master students are free to use Microsoft word or whatever they would like to, the advice for Ph.D. students is to use LaTeX or Scientific Workplace.

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