The Fed and the New Economy
AbstractThis paper seeks to understand the behavior of Greenspan's Federal Reserve in the late 1990s. Some authors suggest that the Fed followed a simple "Taylor rule", while others argue that it deviated from such a rule because it recognized that the "New Economy" permitted an easing of policy. We find that a Taylor rule based on inflation and unemployment does break down in the late 1990s. However, the Fed's behavior appears stable once one accounts for the falling NAIRU of the period. A rule based on inflation and the deviation of unemployment from the NAIRU captures the Fed's behavior through the entire period from 1987 to 2000.
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Bibliographic InfoPaper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 102002.
Length: 15 pages
Date of creation: May 2002
Date of revision:
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Other versions of this item:
- Laurence Ball & Robert R Tchaidze, 2001. "The Fed and the New Economy," Economics Working Paper Archive 465, The Johns Hopkins University,Department of Economics.
- Laurence Ball & Robert Tchaidze, 2002. "The Fed and the New Economy," NBER Working Papers 8785, National Bureau of Economic Research, Inc.
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
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