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Stylized Facts of the FOMC’s Longer-Run Forecasts

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  • Jaime Marquez

    (School of Advanced International Studies, Johns Hopkins University, 1740 Massachusetts Ave. N.W., Washington, DC 20036, USA)

Abstract

Conventional explanations of monetary policy decisions in the United States assume that the longer-run Federal funds rate is determined by a representative central banker (i.e., the Fed) using longer-term forecasts of economic activity and unemployment. This assumption is inconsistent with the federalist structure of the Federal Reserve in which the Federal funds rate is determined by a committee made up of the Federal Reserve Board and the Federal Reserve Banks. This inconsistency would be irrelevant if differences in the Fed participants’ longer-run projections were small or constant, but they are not: disparities in these longer-run projections are large and volatile. This finding raises several questions: Are FOMC participants relying on the same forecasting framework (i.e., model or rules of thumb) but using different values for the forecast drivers? Or are these participants using the same forecast drivers but relying on different frameworks?

Suggested Citation

  • Jaime Marquez, 2023. "Stylized Facts of the FOMC’s Longer-Run Forecasts," JRFM, MDPI, vol. 16(3), pages 1-20, February.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:3:p:152-:d:1079337
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    References listed on IDEAS

    as
    1. David Romer, 2010. "A New Data Set on Monetary Policy: The Economic Forecasts of Individual Members of the FOMC," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(5), pages 951-957, August.
    2. Rülke, Jan-Christoph & Tillmann, Peter, 2011. "Do FOMC members herd?," Economics Letters, Elsevier, vol. 113(2), pages 176-179.
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    5. Jaime Marquez & S Yanki Kalfa, 2021. "The Forecasts of Individual FOMC Members: New Evidence after Ten Years," Working Papers 2021-003, The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting.
    6. S. Yanki Kalfa & Jaime Marquez, 2021. "Forecasting FOMC Forecasts," Econometrics, MDPI, vol. 9(3), pages 1-21, September.
      • S. Yanki Kalfa & Jaime Marquez, 2018. "Forecasting FOMC Forecasts," Working Papers 2018-007, The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting.
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    9. S. Yanki Kalfa & Jaime Marquez, 2019. "FOMC Forecasts: Are They Useful for Understanding Monetary Policy?," JRFM, MDPI, vol. 12(3), pages 1-17, August.
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