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Dynamic Limited Dependent Variable Modeling and US Monetary Policy

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  • George Monokroussos

    ()
    (Economics UCSD)

Abstract

I estimate, using real-time data, a forward-looking monetary policy reaction function that is dynamic and that also accounts for the fact that there are substantial restrictions in the period-to-period changes of the Fed's policy instrument. I find a substantial contrast between the periods before and after Paul Volcker's appointment as Fed Chairman in 1979, both in terms of the Fed's response to expected inflation and in terms of its response to the (perceived) output gap: In the pre-Volcker era the Fed's response to inflation was substantially weaker than in the Volcker-Greenspan era; conversely, the Fed seems to have been more responsive to real activity in the pre-Volcker era than later

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Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2005 with number 460.

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Date of creation: 11 Nov 2005
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Handle: RePEc:sce:scecf5:460

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Cited by:
  1. George Monokroussos, 2009. "A Classical MCMC Approach to the Estimation of Limited Dependent Variable Models of Time Series," Discussion Papers 09-07, University at Albany, SUNY, Department of Economics.
  2. repec:syb:wpbsba:01/2013 is not listed on IDEAS
  3. Sjoerd van den Hauwe & Dick van Dijk & Richard Paap, 2011. "Bayesian Forecasting of Federal Funds Target Rate Decisions," Tinbergen Institute Discussion Papers 11-093/4, Tinbergen Institute.
  4. Kajal Lahiri & Liu Yang, 2012. "Forecasting Binary Outcomes," Discussion Papers 12-09, University at Albany, SUNY, Department of Economics.
  5. Dick van Dijk & Robin L. Lumsdaine & Michel van der Wel, 2014. "Market Set-Up in Advance of Federal Reserve Policy Decisions," NBER Working Papers 19814, National Bureau of Economic Research, Inc.
  6. George Monokroussos, 2006. "A Dynamic Tobit Model for the Open Market Desk's Daily Reaction Function," Computing in Economics and Finance 2006 390, Society for Computational Economics.
  7. Sjoerd van den Hauwe & Dick van Dijk & Richard Paap, 2011. "Bayesian Forecasting of Federal Funds Target Rate Decisions," Tinbergen Institute Discussion Papers 11-093/4, Tinbergen Institute.
  8. Zhang, Xinyu & Lu, Zudi & Zou, Guohua, 2013. "Adaptively combined forecasting for discrete response time series," Journal of Econometrics, Elsevier, vol. 176(1), pages 80-91.

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