We conduct a fairly thorough statistical analysis of the empirical foundations for the existence of a Taylor rule. Inflation, the output gap and the federal funds rate appear to be non-stationary variables that are not cointegrated. Although this lack of cointegration could be caused by missing...

The Engle-Granger test for cointegration is extended by assuming that the error correction terms are asymmetric. Two variants are considered: a simple threshold autoregressive (TAR) model, where the positive and negative disequilibria are the error corrections, and the momentum threshold...