The Federal Reserve's Dual Mandate: A Time-Varying Monetary Policy Priority Index for the United States
AbstractIn the United States, the Federal Reserve has a dual mandate of promoting stable inflation and maximum employment. Since the Fed directly controls only one instrument-the federal funds rate-the authors argue that the Fed's priorities continuously alternate between inflation and economic activity. In this paper, the authors assume that the effective weights put by the Fed on different indicators vary over time. To test this assumption, they estimate a monetary policy priority index by adding non-linear endogenous weights to a conventional Taylor-type rule.
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Bibliographic InfoPaper provided by Bank of Canada in its series Working Papers with number 06-11.
Length: 33 pages
Date of creation: 2006
Date of revision:
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Monetary policy framework; Monetary policy implementation; Econometric and statistical methods;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-06-24 (All new papers)
- NEP-CBA-2006-06-24 (Central Banking)
- NEP-MAC-2006-06-24 (Macroeconomics)
- NEP-MON-2006-06-24 (Monetary Economics)
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