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How forward-looking is the Fed? Direct estimates from a 'Calvo-type' rule

  • Gabriel, Vasco J.
  • Levine, Paul
  • Spencer, Christopher

We estimate an alternative type of monetary policy rule according to which the central bank targets a discounted infinite sum of expected inflation and output gaps. Empirical results suggest that the Fed has a mean forward horizon of 4 to 8 quarters.

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File URL: http://www.sciencedirect.com/science/article/B6V84-4W4CWHG-2/2/b0b6a22dec36897fba91a16f8ed8a3ca
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 104 (2009)
Issue (Month): 2 (August)
Pages: 92-95

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Handle: RePEc:eee:ecolet:v:104:y:2009:i:2:p:92-95
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Athanasios Orphanides, 2001. "Monetary Policy Rules Based on Real-Time Data," American Economic Review, American Economic Association, vol. 91(4), pages 964-985, September.
  2. Levine, Paul & McAdam, Peter & Pearlman, Joseph G., 2006. "Inflation forecast-based-rules and indeterminacy: a puzzle and a resolution," Working Paper Series 0643, European Central Bank.
  3. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  4. Clarida, Richard & Gali, Jordi & Gertler, Mark, 1998. "Monetary policy rules in practice Some international evidence," European Economic Review, Elsevier, vol. 42(6), pages 1033-1067, June.
  5. Marc Paolo Giannoni & Michael Woodford, 2003. "How forward-looking is optimal monetary policy?," Proceedings, Federal Reserve Bank of Cleveland, pages 1425-1483.
  6. Whitney K. Newey & Richard J. Smith, 2004. "Higher Order Properties of Gmm and Generalized Empirical Likelihood Estimators," Econometrica, Econometric Society, vol. 72(1), pages 219-255, 01.
  7. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-58, May.
  8. Andrew Levin & Volker Wieland & John Williams, 2000. "The Performance Of Forecast-Based Monetary Policy Rules Under Model Uncertainty," Computing in Economics and Finance 2000 203, Society for Computational Economics.
  9. Nicoletta Batini & Alejandro Justiniano & Paul Levine & Joseph Pearlman, 2004. "Robust Inflation-Forecast-Based Rules to Shield against Indeterminacy," School of Economics Discussion Papers 0804, School of Economics, University of Surrey.
  10. Orphanides, Athanasios, 2003. "Historical monetary policy analysis and the Taylor rule," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 983-1022, July.
  11. Orphanides, Athanasios & Wieland, Volker, 2008. "Economic Projections and Rules-of-Thumb for Monetary Policy," CEPR Discussion Papers 6748, C.E.P.R. Discussion Papers.
  12. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "Monetary policy rules and macroeconomic stability: Evidence and some theory," Economics Working Papers 350, Department of Economics and Business, Universitat Pompeu Fabra, revised May 1999.
  13. Batini, Nicoletta & Nelson, Edward, 2001. "Optimal horizons for inflation targeting," Journal of Economic Dynamics and Control, Elsevier, vol. 25(6-7), pages 891-910, June.
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