Is the Fed too timid? Monetary policy in an uncertain world
AbstractEstimates of the Taylor rule using historical data from the past decade or two suggest that monetary policy in the U.S. can be characterized as having reacted in a moderate fashion to output and inflation gaps. In contrast, the parameters of optimal Taylor rules derived using empirical models of the economy often recommend much more vigorous policy responses. This paper attempts to match the historical policy rule with an optimal policy rule by incorporating uncertainty into the derivation of the latter.
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Bibliographic InfoPaper provided by Federal Reserve Bank of San Francisco in its series Working Papers in Applied Economic Theory with number 99-05.
Date of creation: 1999
Date of revision:
Other versions of this item:
- Glenn D. Rudebusch, 2001. "Is The Fed Too Timid? Monetary Policy In An Uncertain World," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 203-217, May.
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