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On the Information Content of Asymmetric FOMC Policy Statements: Evidence From a Taylor-Rule Perspective

Author

Listed:
  • Michael R. Pakko

Abstract

For over two decades, the FOMC has included in its policy decisions a statement of bias toward subsequent tightening or easing of policy. This article examines the predictive content of these statements in a Taylor-rule setting, finding that they convey useful information for forecasting changes in the federal funds rate target, even after controlling for policy responses to inflation and the output gap. Moreover, the evidence suggests that this asymmetry can be represented in terms of shifts to the parameters of the Taylor-rule equation, indicating a greater or lesser degree of responsiveness to information about inflation and output. (JEL E52, E58) Copyright 2005, Oxford University Press.

Suggested Citation

  • Michael R. Pakko, 2005. "On the Information Content of Asymmetric FOMC Policy Statements: Evidence From a Taylor-Rule Perspective," Economic Inquiry, Western Economic Association International, vol. 43(3), pages 558-569, July.
    • Handle: RePEc:oup:ecinqu:v:43:y:2005:i:3:p:558-569
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    Cited by:

    1. Mario Gonzalez & Raul Cruz Tadle, 2022. "Monetary policy press releases: an international comparison," BIS Working Papers 1023, Bank for International Settlements.
    2. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 910-945, December.
    3. repec:fce:doctra:13-03 is not listed on IDEAS
    4. Andrei Sirchenko, 2019. "A regime-switching model for the federal funds rate target," UvA-Econometrics Working Papers 19-01, Universiteit van Amsterdam, Dept. of Econometrics.
    5. Alan S. Blinder, 2008. "Talking about Monetary Policy: The Virtues (and Vices?) of Central Bank Communication," Working Papers 1048, Princeton University, Department of Economics, Center for Economic Policy Studies..
    6. Fischer, Andreas M. & Ranaldo, Angelo, 2011. "Does FOMC news increase global FX trading?," Journal of Banking & Finance, Elsevier, vol. 35(11), pages 2965-2973, November.
    7. Paul Hubert, 2015. "The Influence and Policy Signalling Role of FOMC Forecasts," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 77(5), pages 655-680, October.
    8. Pisun Xu & Jian Yang, 2011. "U.S. Monetary Policy Surprises and International Securitized Real Estate Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 43(4), pages 459-490, November.
    9. Qin, Ting & Enders, Walter, 2008. "In-sample and out-of-sample properties of linear and nonlinear Taylor rules," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 428-443, March.
    10. Hubert, Paul & Labondance, Fabien, 2021. "The signaling effects of central bank tone," European Economic Review, Elsevier, vol. 133(C).
    11. repec:spo:wpmain:info:hdl:2441/7v8fvu0bf08jcoi4epn8cutjm8 is not listed on IDEAS
    12. David-Jan Jansen & Jakob de Haan, 2005. "Is a Word to the Wise Indeed Enough? ECB Statements and the Predictibility of Interest Rate Decisions," DNB Working Papers 075, Netherlands Central Bank, Research Department.
    13. Paul Hubert & Fabien Labondance, 2019. "Central bank tone and the dispersion of views within monetary policy committees," Sciences Po Economics Publications (main) hal-03403256, HAL.
    14. Hayo, Bernd & Neuenkirch, Matthias, 2010. "Do Federal Reserve communications help predict federal funds target rate decisions?," Journal of Macroeconomics, Elsevier, vol. 32(4), pages 1014-1024, December.
    15. repec:spo:wpmain:info:hdl:2441/3mgbd73vkp9f9oje7utooe7vpg is not listed on IDEAS
    16. Alan S. Blinder, 2008. "Talking about Monetary Policy: The Virtues (and Vices?) of Central Bank Communication," Working Papers 1048, Princeton University, Department of Economics, Center for Economic Policy Studies..
    17. Seibert, Armin & Sirchenko, Andrei & Müller, Gernot, 2021. "A model for policy interest rates," Journal of Economic Dynamics and Control, Elsevier, vol. 124(C).
    18. repec:pri:cepsud:164blinder is not listed on IDEAS
    19. Bluhm, Marcel, 2011. "Investigating the monetary policy of central banks with assessment indicators," CFS Working Paper Series 2011/20, Center for Financial Studies (CFS).
    20. repec:pri:cepsud:161blinder is not listed on IDEAS
    21. Bluhm, Marcel, 2015. "Investigating the monetary policy of central banks with assessment indicators," European Journal of Political Economy, Elsevier, vol. 38(C), pages 181-196.
    22. Bernd Hayo & Matthias Neuenkirch, 2011. "Canadian Interest Rate Setting: The Information Content of Canadian and U.S. Central Bank Communication," Southern Economic Journal, John Wiley & Sons, vol. 78(1), pages 131-148, July.
    23. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 910-945, December.

    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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