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The Fed's perceived Phillips curve: Evidence from individual FOMC forecasts

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  • Tillmann, Peter

Abstract

This paper uncovers the Phillips curve trade-off perceived by US monetary policymakers. For that purpose we use data on individual forecasts for unemployment and inflation submitted by each individual FOMC member, which was recently made available for the period 1992-1998. The results point to significant changes in the perceived trade-off over time with the Phillips curve flattening and the implied NAIRU falling towards the second half of the sample. Hence, the results suggest that policymakers were aware of these changes in real-time.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 32 (2010)
Issue (Month): 4 (December)
Pages: 1008-1013

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Handle: RePEc:eee:jmacro:v:32:y:2010:i:4:p:1008-1013

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Web page: http://www.elsevier.com/locate/inca/622617

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Keywords: Inflation forecast NAIRU Phillips curve Real-time data Federal Reserve;

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References

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  1. Andrew Atkeson & Lee E. Ohanian., 2001. "Are Phillips curves useful for forecasting inflation?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-11.
  2. Todd E. Clark & Michael W. McCracken, 2003. "The predictive content of the output gap for inflation : resolving in-sample and out-of-sample evidence," Research Working Paper RWP 03-06, Federal Reserve Bank of Kansas City.
  3. Ellen E. Meade & Daniel L. Thornton, 2010. "The Phillips Curve and US Monetary Policy: What the FOMC Transcripts Tell Us," Working Papers 2010-18, American University, Department of Economics.
  4. William T. Gavin, 2003. "FOMC forecast: is all the information in the central tendency?," Review, Federal Reserve Bank of St. Louis, issue May, pages 27-46.
  5. Carlos Capistrán-Carmona, 2005. "Bias in Federal Reserve Inflation Forecasts: Is the Federal Reserve Irrational or Just Cautious?," Computing in Economics and Finance 2005 127, Society for Computational Economics.
  6. Yuriy Gorodnichenko & Matthew D. Shapiro, 2006. "Monetary Policy When Potential Output is Uncertain: Understanding the Growth Gamble of the 1990s," NBER Working Papers 12268, National Bureau of Economic Research, Inc.
  7. William T. Gavin & Rachel J. Mandal, 2002. "Evaluating FOMC forecasts," Working Papers 2001-005, Federal Reserve Bank of St. Louis.
  8. Laurence Ball & Robert Tchaidze, 2002. "The Fed and the New Economy," NBER Working Papers 8785, National Bureau of Economic Research, Inc.
  9. William T. Gavin & Geetanjali Pande, 2008. "FOMC consensus forecasts," Review, Federal Reserve Bank of St. Louis, issue May, pages 149-164.
  10. Athanasios Orphanides & Volker Wieland, 2008. "Economic Projections and Rules-of-Thumb for Monetary Policy," Discussion Papers 07-035, Stanford Institute for Economic Policy Research.
  11. David H. Romer, 2009. "A New Data Set on Monetary Policy: The Economic Forecasts of Individual Members of the FOMC," NBER Working Papers 15208, National Bureau of Economic Research, Inc.
  12. Chanont Banternghansa & Michael W. McCracken, 2009. "Forecast disagreement among FOMC members," Working Papers 2009-059, Federal Reserve Bank of St. Louis.
  13. Christina D. Romer & David H. Romer, 2008. "The FOMC versus the Staff: Where Can Monetary Policymakers Add Value?," American Economic Review, American Economic Association, vol. 98(2), pages 230-35, May.
  14. Martin Ellison & Thomas J. Sargent, 2009. "A defence of the FOMC," Economics Series Working Papers 457, University of Oxford, Department of Economics.
    • Martin Ellison & Thomas J. Sargent, 2012. "A Defense Of The Fomc," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(4), pages 1047-1065, November.
  15. Douglas Staiger & James H. Stock & Mark W. Watson, 2001. "Prices, Wages and the U.S. NAIRU in the 1990s," NBER Working Papers 8320, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Martin Ellison & Martin Ellison & Alina Barnett, 2011. "Learning by Disinflating," Economics Series Working Papers 579, University of Oxford, Department of Economics.
  2. Paul Hubert, 2011. "Central Bank Forecasts as an Instrument of Monetary Policy," Documents de Travail de l'OFCE 2011-23, Observatoire Francais des Conjonctures Economiques (OFCE).
  3. Paloviita, Maritta & Viren, Matti, 2012. "Inflation and output growth uncertainty in individual survey expectations," Research Discussion Papers 37/2012, Bank of Finland.
  4. Christian Pierdzioch & Jan-Christoph Rülke & Peter Tillmann, 2013. "Using forecasts to uncover the loss function of FOMC members," MAGKS Papers on Economics 201302, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  5. Maritta Paloviita and Matti Viren, 2012. "Are individual survey expectations internally consistent?," Discussion Papers 77, Aboa Centre for Economics.
  6. Peter Tillmann, 2011. "Reputation and Forecast Revisions: Evidence from the FOMC," MAGKS Papers on Economics 201128, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  7. El-Shagi, Makram & Jung, Alexander, 2013. "Does the Greenspan era provide evidence on leadership in the FOMC?," Working Paper Series 1579, European Central Bank.
  8. Paul Hubert, 2013. "The influence and policy signaling role of FOMC forecasts," Documents de Travail de l'OFCE 2013-03, Observatoire Francais des Conjonctures Economiques (OFCE).
  9. Maritta Paloviita & Matti Viren, 2014. "Inflation and output growth uncertainty in individual survey expectations," Empirica, Springer, vol. 41(1), pages 69-81, February.

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