This paper has a twofold purpose. In the context of a structural macroeconomic model, it derives estimates of the Federal Reserve's preference parameters in its pre and post - 1980 loss function. We show that there was an economically, but not statistically, significant change in the preferences of the U.S. Fed towards inflation stabilization. We also derive, within a strict inflation targeting regime, the optimal changes in the Fed's reaction to expected inflation as a function of the forward looking parameters in the supply and demand equations.
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Paper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number
02/04.
Length: 21 pages pages Date of creation: Jan 2004 Date of revision: Publication status: Forthcoming, James Tobin conference volume "Monetary Policy and Labor Markets: A Conference in Honor of James Tobin, New York 2002". Handle: RePEc:una:unccee:wp0204
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Find related papers by JEL classification: C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions C62 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Existence and Stability Conditions of Equilibrium E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
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