The Greenbook and U.S. Monetary Policy

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The Greenbook and U.S. Monetary Policy

Author Info

Robert Tchaidze

Abstract

Although very attractive both theoretically and empirically, Taylor rules imply mechanical responses by the policy variable (interest rate) to fundamental ones (inflation and output gap). This study looks for empirical evidence of a more sophisticated monetary policy, one which takes into account expected future developments. An important piece of information added is the "Greenbook" forecast series, calculated by the Federal Reserve staff and which allow evaluation of expected inflation shocks. These shocks are significant in the estimated Taylor rule, confirming that policymaking is forward looking. This paper also demonstrates that a simple Taylor rule may be a misspecification if policymakers have in mind a timevarying inflation target.

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Publisher Info
Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/213.

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Length: 22 pages
Date of creation: 24 Nov 2004
Date of revision:
Handle: RePEc:imf:imfwpa:04/213

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This paper has been announced in the following NEP Reports:

NEP-ALL-2005-10-22 (All new papers)
NEP-CBA-2005-10-22 (Central Banking)
NEP-FOR-2005-10-22 (Forecasting)
NEP-MAC-2005-10-22 (Macroeconomics)
NEP-MON-2005-10-22 (Monetary Economics)
NEP-PBE-2005-10-26 (Public Economics)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

John C. Williams, 2003. "Simple rules for monetary policy," Economic Review, Federal Reserve Bank of San Francisco, pages 1-12. [Downloadable!]
Other versions:
- John C. Williams, 1999. "Simple rules for monetary policy," Finance and Economics Discussion Series 1999-12, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
Robert R Tchaidze, 2001. "Estimating Taylor Rules in a Real Time Setting," Economics Working Paper Archive 457, The Johns Hopkins University,Department of Economics. [Downloadable!]
Athanasios Orphanides, 1998. "Monetary policy rules based on real-time data," Finance and Economics Discussion Series 1998-03, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
Other versions:
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Christina D. Romer & David H. Romer, 2000. "Federal Reserve Information and the Behavior of Interest Rates," American Economic Review, American Economic Association, vol. 90(3), pages 429-457, June. [Downloadable!] (restricted)
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Other versions:
- Laurence Ball, 1997. "Efficient rules for monetary policy," Reserve Bank of New Zealand Discussion Paper Series G97/3, Reserve Bank of New Zealand. [Downloadable!]
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Svensson, Lars E. O., 1997. "Inflation forecast targeting: Implementing and monitoring inflation targets," European Economic Review, Elsevier, vol. 41(6), pages 1111-1146, June. [Downloadable!] (restricted)
Other versions:
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- Svensson, Lars E.O., 1997. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," Seminar Papers 615, Stockholm University, Institute for International Economic Studies. [Downloadable!]
- Svensson, Lars E O, 1996. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," CEPR Discussion Papers 1511, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Lars E. O. Svensson, 1997. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," NBER Working Papers 5797, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-47, February. [Downloadable!] (restricted)
Glenn D. Rudebusch, 1999. "Is the Fed too timid? Monetary policy in an uncertain world," Working Papers in Applied Economic Theory 99-05, Federal Reserve Bank of San Francisco. [Downloadable!]
Other versions:
- 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. [Downloadable!] (restricted)
Roberts, John M., 1997. "Is inflation sticky?," Journal of Monetary Economics, Elsevier, vol. 39(2), pages 173-196, July. [Downloadable!] (restricted)
Other versions:
- John M. Roberts, 1994. "Is inflation sticky?," Working Paper Series / Economic Activity Section 152, Board of Governors of the Federal Reserve System (U.S.).

Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Kishor, N. Kundan & Newiak, Monique, 2009. "The Instability in the Monetary Policy Reaction Function and the Estimation of Monetary Policy Shocks," MPRA Paper 17643, University Library of Munich, Germany. [Downloadable!]

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