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Shifting data: a challenge for monetary policymakers

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  • John G. Fernald
  • Stephanie Wang

Abstract

A familiar old saw about the conduct of monetary policy is that it's like trying to drive a car while looking only in the rearview mirror. The idea is that policymakers are trying to steer a course that will keep the economy close to full employment with low, stable inflation, while their only knowledge of the road ahead is based on data about the past. ; As if this situation weren't challenging enough, the rearview mirror sometimes gives a distorted reflection, in the sense that the data policymakers see at any one point in time are often later revised. This Economic Letter discusses a particular example, the annual revision to the national accounts in July 2005, which included a substantial upward revision to previously benign inflation estimates, and it lays out some ways that policymakers can address the challenge of changing data.

Suggested Citation

  • John G. Fernald & Stephanie Wang, 2005. "Shifting data: a challenge for monetary policymakers," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue dec9.
    • Handle: RePEc:fip:fedfel:y:2005:i:dec9:n:2005-35
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    File URL: http://www.frbsf.org/publications/economics/letter/2005/el2005-35.pdf
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    File URL: http://www.frbsf.org/publications/economics/letter/2005/el2005-35.html
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    References listed on IDEAS

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    1. Tao Wu, 2005. "Estimating the \\"neutral\\" real interest rate in real time," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue oct21.
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    Cited by:

    1. Pierre-Daniel G. Sarte, 2010. "Learning about informational rigidities from sectoral data and diffusion indices," Working Paper 10-09, Federal Reserve Bank of Richmond.

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