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Abstract

This paper examines the magnitude of informational problems associated with the implementation and interpretation of simple monetary policy rules. Using Taylor's rule as an example, I demonstrate that real-time policy recommendations differ considerably from those obtained with ex post revised data. Further, estimated policy reaction functions based on ex post revised data provide misleading descriptions of historical policy and obscure the behavior suggested by information available to the Federal Reserve in real time. These results indicate that reliance on the information actually available to policy makers in real time is essential for the analysis of monetary policy rules.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.91.4.964
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 91 (2001)
Issue (Month): 4 (September)
Pages: 964-985

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Handle: RePEc:aea:aecrev:v:91:y:2001:i:4:p:964-985

Note: DOI: 10.1257/aer.91.4.964
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Find related papers by JEL classification:

• E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
• E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

References

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1. Base de Dados
   by Angelo M. Fasolo in The Duke of Hazard on 2008-10-04 15:22:00
2. Blogs review: The Monetary Regime and the drawbacks of NGDP targeting
   by ? in Bruegel blog on 2013-02-08 10:19:36

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