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Inflation zone targeting and the Federal Reserve

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  • Tachibana, Minoru

Abstract

The purpose of this paper is to examine whether the Federal Reserve (the Fed) implicitly implemented an inflation zone targeting policy. To this end, I estimate the piecewise linear Taylor rule, in which the magnitude of the inflation coefficient depends on whether inflation lies within or outside a target zone. The estimation results show that the Fed conducted an inflation zone targeting policy during the 1987-2004 period. In addition, it is found that a symmetric (not asymmetric) specification of the piecewise linear rule is adequate to describe the inflation zone targeting behavior of the Fed. J. Japanese Int. Economies 22 (1) (2008) 68-84.

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  • Tachibana, Minoru, 2008. "Inflation zone targeting and the Federal Reserve," Journal of the Japanese and International Economies, Elsevier, vol. 22(1), pages 68-84, March.
    • Handle: RePEc:eee:jjieco:v:22:y:2008:i:1:p:68-84
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    1. de Mello Luiz & Moccero Diego & Mogliani Matteo, 2013. "Do Latin American Central Bankers Behave Non-Linearly? The Experiences of Brazil, Chile, Colombia and Mexico," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 17(2), pages 141-165, April.
    2. Paulo R. Mota & Abel L. C. Fernandes, 2019. "The Dynamic Adjustment Of Central Banks’ Target Interest Rate: The Case Of The Ecb," FEP Working Papers 613, Universidade do Porto, Faculdade de Economia do Porto.
    3. Srinivasan, Naveen & Kumar, Sudhanshu, 2012. "Zone-quadratic preference, asymmetry and international reserve accretion in India: An empirical investigation," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(2), pages 253-263.
    4. Tachibana, Minoru, 2006. "Did the Bank of Japan have a target zone for the inflation rate?," Economics Letters, Elsevier, vol. 92(1), pages 131-136, July.

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