Advanced Search
MyIDEAS: Login

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

Contents:

Author Info

  • Pierre L. Siklos

    () (Department of Economics and Viessman Research Centre, Wilfrid Laurier University)

  • 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. We find that monetary policy affects inflation pressure and realized inflation primarily through its impact on expectations. We also find that while the Fed manages to influence expectations almost two thirds of the time the impact can be quantitatively small at times. One policy implication is that policy communication perhaps plays an even more crucial role for a gradualist central bank than one might think a priori.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.accessecon.com/pubs/VUECON/vu11-w10.pdf
File Function: Revised version, September 2011
Download Restriction: no

Bibliographic Info

Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 1110.

as in new window
Length:
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:van:wpaper:1110

Contact details of provider:
Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

Related research

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

Other versions of this item:

Find related papers by JEL classification:

References

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.:
as in new window
  1. Dean Croushore & Charles L. Evans, 2000. "Data Revisions and the Identification of Monetary Policy Shocks," Econometric Society World Congress 2000 Contributed Papers 0842, Econometric Society.
  2. Lanne , Markku, 2002. "Nonlinear dynamics of interest rate and inflation," Research Discussion Papers 21/2002, Bank of Finland.
  3. Siklos,Pierre L., 2002. "The Changing Face of Central Banking," Cambridge Books, Cambridge University Press, number 9780521780254.
  4. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," CEPR Discussion Papers 2139, C.E.P.R. Discussion Papers.
  5. Söderlind, Paul & Söderström, Ulf & Vredin, Anders, 2003. "Taylor Rules and the Predictability of Interest Rates," CEPR Discussion Papers 3934, C.E.P.R. Discussion Papers.
  6. Rudebusch, Glenn D., 2002. "Term structure evidence on interest rate smoothing and monetary policy inertia," Journal of Monetary Economics, Elsevier, vol. 49(6), pages 1161-1187, September.
  7. Ben S. Bernanke, 2004. "Gradualism : remarks at an economics luncheon co-sponsored by the Federal Reserve Bank of San Francisco (Seattle Branch) and the University of Washington, Seattle, Washington, May 20, 2004," Speech, Board of Governors of the Federal Reserve System (U.S.).
  8. 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.
  9. Pierre Siklos & Martin Bohl, 2009. "Asset Prices as Indicators of Euro Area Monetary Policy: An Empirical Assessment of Their Role in a Taylor Rule," Open Economies Review, Springer, vol. 20(1), pages 39-59, February.
  10. 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.
  11. 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.
  12. 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, vol. 22, pages 225-239, April.
  13. Dean Croushore, 2008. "Revisions to PCE inflation measures: implications for monetary policy," Working Papers 08-8, Federal Reserve Bank of Philadelphia.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:van:wpaper:1110

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.