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Data Revisions, Gradualism, and US Inflation Pressure in Real Time

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  • Pierre L. Siklos

    ()
    (Department of Economics, Wilfrid Laurier University and)

  • Diana N. Weymark

    ()
    (Department of Economics, Vanderbilt University)

Abstract

Uncertainties associated with the informational content of real-time data and the impact of policy initiatives on expectations have been offered as rationales for gradualism in monetary policy. Our objective is to assess these potential explanations quantitatively. Focusing on inflation as the key variable of interest to central banks, we construct indices of inflation pressure to characterize the state of the economy before and after the implementation of monetary policy. Using six vintages of US data, we analyze changes in the information content of economic data across revisions and the importance of expectations in determining the impact of monetary policy.

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File URL: http://www.accessecon.com/pubs/VUECON/vu08-w16R.pdf
File Function: Revised version, 2008
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Bibliographic Info

Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 0816.

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Date of creation: Sep 2008
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Handle: RePEc:van:wpaper:0816

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Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

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Keywords: Inflation pressure; counterfactuals; real time data; gradualism; monetary policy;

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References

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  1. Richard Clarida & Jordi Gali & Mark Gertler, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," NBER Working Papers 7147, National Bureau of Economic Research, Inc.
  2. Andrew Ang & Geert Bekaert & Min Wei, 2005. "Do Macro Variables, Asset Markets or Surveys Forecast Inflation Better?," NBER Working Papers 11538, National Bureau of Economic Research, Inc.
  3. Siklos,Pierre L., 2006. "The Changing Face of Central Banking," Cambridge Books, Cambridge University Press, number 9780521034494, 9.
  4. Dean Croushore & Charles L. Evans, 2003. "Data revisions and the identification of monetary policy shocks," Working Papers 03-1, Federal Reserve Bank of Philadelphia.
  5. Jondeau E. & Le Bihan H. & Galles C., 2004. "Assessing Generalized Method-of-Moments Estimates of the Federal Reserve Reaction Function," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 22, pages 225-239, April.
  6. Dean Croushore, 2008. "Revisions to PCE inflation measures: implications for monetary policy," Working Papers 08-8, Federal Reserve Bank of Philadelphia.
  7. Kala Krishna & Tor Winston, 1998. "A New Model of Quality," NBER Working Papers 6580, National Bureau of Economic Research, Inc.
  8. Pierre L. Siklos & Martin T. Bohl, 2007. "Asset Prices as Indicators of Euro Area Monetary Policy: An Empirical Assessment of Their Role in a Taylor Rule," Working Paper Series, The Rimini Centre for Economic Analysis 32-07, The Rimini Centre for Economic Analysis, revised Jul 2007.
  9. John B. Taylor & John C. Williams, 2010. "Simple and robust rules for monetary policy," Working Paper Series 2010-10, Federal Reserve Bank of San Francisco.
  10. Rudebusch, Glenn D., 2002. "Term structure evidence on interest rate smoothing and monetary policy inertia," Journal of Monetary Economics, Elsevier, Elsevier, vol. 49(6), pages 1161-1187, September.
  11. Weymark, Diana N, 1998. "A General Approach to Measuring Exchange Market Pressure," Oxford Economic Papers, Oxford University Press, vol. 50(1), pages 106-21, January.
  12. Lanne , Markku, 2002. "Nonlinear dynamics of interest rate and inflation," Research Discussion Papers 21/2002, Bank of Finland.
  13. Weymark, Diana N., 1995. "Estimating exchange market pressure and the degree of exchange market intervention for Canada," Journal of International Economics, Elsevier, vol. 39(3-4), pages 273-295, November.
  14. Diana N. Weymark & Mototsugu Shintani, 2004. "Measuring Inflation Pressure and Monetary Policy Response: A General Approach Applied to US Data 1966 - 2001," Vanderbilt University Department of Economics Working Papers 0424, Vanderbilt University Department of Economics.
  15. Söderlind, Paul & Söderström, Ulf & Vredin, Anders, 2003. "Taylor Rules and the Predictability of Interest Rates," Working Paper Series 147, Sveriges Riksbank (Central Bank of Sweden).
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