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Decomposing Federal Funds Rate forecast uncertainty using real-time data

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  • Mandler, Martin

Abstract

This paper uses real-time data for the U.S. to estimate out-of-sample forecast uncertainty about the Federal Funds Rate. By combining a Taylor rule with an unobserved components model of economic fundamentals I separate forecast uncertainty into economically interpretable components that represent uncertainty about future economic conditions and uncertainty about future monetary policy. The estimation results indicate important time variation in uncertainty about the future Federal Funds Rate.

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File URL: http://mpra.ub.uni-muenchen.de/13498/
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File URL: http://mpra.ub.uni-muenchen.de/18768/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 13498.

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Date of creation: Feb 2007
Date of revision: Jan 2009
Handle: RePEc:pra:mprapa:13498

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Keywords: monetary policy reaction function; interest rate uncertainty; state-space model;

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