Dear Professor Pfeifer,
After bayesian estimation of the model, I got negative value of parameter rhoy (e.g. -0.05) in Taylor Rule which is written as
exp( R ) = R_ss^(1 - rhoR )
* (exp(dp)/pi_ss)^( rhopi*(1-rhoR) )
* (exp(y)/exp(y(-1)))^( rhoy*(1-rhoR) )
I was wondering if it’s OK to accept this result as I seldom see negative value of this parameter in other papers, and how should I interpret this ?
Thank you for your time.