Federal reserve policy viewed through a money supply lens

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Federal reserve policy viewed through a money supply lens

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Chowdhury, Ibrahim
Schabert, Andreas

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Abstract

Federal Reserve nonborrowed reserve supply systematically responded to changes in inflation and in the output gap over the period 1969-2000. While the feedback from output gap is always negative, the response of money supply to changes in inflation varies considerably across time. Nonborrowed reserves decreased with inflation in the post-1979 period and increased in the pre-1979 period. Applying a standard macro-model, the estimated reaction functions are shown to ensure equilibrium determinacy. Viewed through the money supply lens, Federal Reserve policy substantially changed over time, but has never allowed for endogenous fluctuations, which contrasts conclusions drawn from federal funds rate analyses.

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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 55 (2008)
Issue (Month): 4 (May)
Pages: 825-834
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Handle: RePEc:eee:moneco:v:55:y:2008:i:4:p:825-834

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Paper
- Ibrahim Chowdhury & Andreas Schabert, 2008. "Federal Reserve Policy viewed through a Money Supply Loss," Tinbergen Institute Discussion Papers 08-023/2, Tinbergen Institute. [Downloadable!]
- Chowdhury, Ibrahim & Schabert, Andreas, 2007. "Federal Reserve Policy viewed through a Money Supply Lens," Working Papers 2007-2, Swiss National Bank. [Downloadable!]

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