Revealing the preferences of the US Federal Reserve
AbstractWe use Bayesian methods to estimate the preferences of the US Federal Reserve by assuming that monetary policy is performed optimally under commitment since the mid-sixties. For this purpose, we distinguish between three subperiods, i.e. the pre-Volcker, the Volcker-Greenspan and the Greenspan period. The US economy is described by the Smets and Wouters (2007) model. We find that there has been a switch in the monetary policy regime since Volcker, with a focus on output growth instead of the output gap level as a target variable. We further show that both interest rate variability and interest rate smoothing are significant target variables, though less important than the inâ¡ation and output growth targets. We find that the "Great Moderation" of output growth is largely explained by the decrease in the volatility of the structural shocks. The Inflation Stabilization, however, is mainly due to the change in monetary policy that took place at the start of Volcker's mandate. During the Greenspan period, the optimal Taylor rule appears to be equally robust to parameter uncertainty as the unrestricted optimal commitment rule.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.
Volume (Year): 27 (2012)
Issue (Month): 3 (04)
Contact details of provider:
Web page: http://www.interscience.wiley.com/jpages/0883-7252/
Other versions of this item:
- Pelin Ilbas, 2007. "Revealing the preferences of the US Federal Reserve," Working Paper, Norges Bank 2008/21, Norges Bank, revised 12 Dec 2008.
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Givens, Gregory & Salemi, Michael, 2012. "Inferring monetary policy objectives with a partially observed state," MPRA Paper 39353, University Library of Munich, Germany.
- Andreza Aparecida Palma & Marcelo Savino Portugal, 2014. "Preferences Of The Central Bank Of Brazil Under The Inflation Targeting Regime: Estimation Using A Dsge Model For A Small Open Economy," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41th Brazilian Economics Meeting], ANPEC - AssociaÃ§Ã£o Nacional dos Centros de PÃ³sgraduaÃ§Ã£o em Economia [Brazilian Association of Gra 055, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
- Angelini, Paolo & Neri, Stefano & Panetta, Fabio, 2012.
"Monetary and macroprudential policies,"
Working Paper Series, European Central Bank
1449, European Central Bank.
- Paolo Angelini & Stefano Neri & Fabio Panetta, 2011. "Monetary and macroprudential policies," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 801, Bank of Italy, Economic Research and International Relations Area.
- Cabrera, Nilda & Bejarano, Edilean & Savino Portugal, Marcelo, 2011. "Preferences of the Central Reserve Bank of Peru and optimal monetary policy rules in the inflation targeting regime," Working Papers, Banco Central de Reserva del PerÃº 2011-010, Banco Central de Reserva del Perú.
- Gregory Erin Givens, 2009.
"Estimating Central Bank Preferences under Commitment and Discretion,"
Working Papers, Middle Tennessee State University, Department of Economics and Finance
200905, Middle Tennessee State University, Department of Economics and Finance.
- Gregory E. Givens, 2012. "Estimating Central Bank Preferences under Commitment and Discretion," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 44(6), pages 1033-1061, 09.
- Davide Debortoli & Junior Maih & Ricardo Nunes, 2011. "Loose commitment in medium-scale macroeconomic models: theory and applications," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 1034, Board of Governors of the Federal Reserve System (U.S.).
- Caglayan, Mustafa & Jehan, Zainab & Mouratidis, Kostas, 2012. "Asymmetric monetary policy rules for open economies: Evidence from four countries," MPRA Paper 37401, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.