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Monetary policy when the spyglass is smudged

Author

Listed:
  • Elias, Early

    () (Federal Reserve Bank of San Francisco)

  • Irvin, Helen

    () (Federal Reserve Bank of San Francisco)

  • Jorda, Oscar

    () (Federal Reserve Bank of San Francisco)

Abstract

An accurate measure of economic slack is key to properly calibrating monetary policy. Two traditional gauges of slack have become harder to interpret since the Great Recession: the gap between output and its potential level, and the deviation of the unemployment rate from its natural rate. As a consequence, conventional policy rules based on these measures of slack generate wide-ranging policy rate recommendations. This variability highlights one of the challenges policymakers currently face.

Suggested Citation

  • Elias, Early & Irvin, Helen & Jorda, Oscar, 2014. "Monetary policy when the spyglass is smudged," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
  • Handle: RePEc:fip:fedfel:00037
    as

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    File URL: http://www.frbsf.org/economic-research/publications/economic-letter/2014/november/unemployment-monetary-policy-economic-growth-Taylor-rule/el2014-35.pdf
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    References listed on IDEAS

    as
    1. Bosler, Canyon & Daly, Mary C. & Nechio, Fernanda, 2014. "Mixed signals: labor markets and monetary policy," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    2. Daly, Mary C. & Fernald, John G. & Jorda, Oscar & Nechio, Fernanda, 2014. "Interpreting deviations from Okun’s Law," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    3. Taylor, John B., 1999. "The robustness and efficiency of monetary policy rules as guidelines for interest rate setting by the European central bank," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 655-679, June.
    Full references (including those not matched with items on IDEAS)

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. A Monetary Policy Framework for the Next Recession
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2017-12-11 19:02:11

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    1. repec:oup:revfin:v:21:y:2017:i:1:p:389-432. is not listed on IDEAS

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