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The Phillips curve and US monetary policy: what the FOMC transcripts tell us

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  • Ellen E. Meade
  • Daniel L. Thornton

Abstract

The Phillips curve framework, which includes the output gap and natural rate hypothesis, plays a central role in the canonical macroeconomic model used in analyses of monetary policy. It is now well understood that real-time data must be used to evaluate historical monetary policy. We believe that it is equally important that macroeconomic models used to evaluate historical monetary policy reflect the framework that policymakers used to formulate that policy. To that end, we use the Federal Open Market Committee (FOMC) transcripts to examine the role that the Phillips curve framework played in Fed policymaking from 1979 through 2003. The FOMC's transcripts allow us to trace the evolution in policymakers' discussion of the Phillips curve framework over time. Our analysis suggests that the Phillips curve was much less central to the formulation and implementation of US monetary policy than it is in models commonly used to evaluate that policy. Copyright 2012 Oxford University Press 2011 All rights reserved, Oxford University Press.

Suggested Citation

  • Ellen E. Meade & Daniel L. Thornton, 2012. "The Phillips curve and US monetary policy: what the FOMC transcripts tell us," Oxford Economic Papers, Oxford University Press, vol. 64(2), pages 197-216, April.
    • Handle: RePEc:oup:oxecpp:v:64:y:2012:i:2:p:197-216
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    File URL: http://hdl.handle.net/10.1093/oep/gpr047
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    Cited by:

    1. Rancan, Antonella, 2021. "The “Place Of The Phillips Curve” in Macroeconometric Models: The Case of the First Federal Reserve Board’s Model (1966-1980s)," OSF Preprints t5jrx, Center for Open Science.
    2. Jakob de Haan & David-Jan Jansen, 2011. "Corporate culture and behaviour: A survey," DNB Working Papers 334, Netherlands Central Bank, Research Department.
    3. Christian Pierdzioch & Jan-Christoph Rülke & Peter Tillmann, 2013. "Using forecasts to uncover the loss function of FOMC members," MAGKS Papers on Economics 201302, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    4. Stefan Reitz & Ulf D. Slopek, 2014. "Fixing The Phillips Curve: The Case Of Downward Nominal Wage Rigidity In The Us," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 19(2), pages 122-131, March.
    5. Rotemberg, Julio J., 2015. "The Federal Reserve׳s abandonment of its 1923 objectives of monetary policy," Research in Economics, Elsevier, vol. 69(4), pages 475-493.
    6. Thornton, Daniel L., 2014. "Monetary policy: Why money matters (and interest rates don’t)," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 202-213.
    7. El-Shagi, Makram & Jung, Alexander, 2015. "Does the Greenspan era provide evidence on leadership in the FOMC?," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 173-190.
    8. Tillmann, Peter, 2010. "The Fed's perceived Phillips curve: Evidence from individual FOMC forecasts," Journal of Macroeconomics, Elsevier, vol. 32(4), pages 1008-1013, December.
    9. repec:osf:osfxxx:t5jrx_v1 is not listed on IDEAS
    10. Hamza Bennani, 2016. "Measuring Monetary Policy Stress for Fed District Representatives," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(2), pages 156-176, May.
    11. Daniel L. Thornton, 2018. "Greenspan's Conundrum and the Fed's Ability to Affect Long‐Term Yields," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 50(2-3), pages 513-543, March.
    12. Kevin L. Kliesen, 2023. "Risk Management in Monetary Policymaking: The 1994-95 Fed Tightening Episode," Working Papers 2023-030, Federal Reserve Bank of St. Louis.
    13. Carré, Emmanuel, 2013. "La cible d’inflation de la Fed : continuité ou rupture ?," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 14.
    14. Wolfgang Pollan, 2013. "US Inflation and Crude Oil Prices. An International Perspective," WIFO Working Papers 451, WIFO.
    15. Kevin L. Kliesen, 2025. "Risk Management in Monetary Policymaking: The 1994-95 FOMC Tightening Episode," Review, Federal Reserve Bank of St. Louis, vol. 107(6), pages 1-16, April.
    16. Ayse Kaya & Stephen Golub & Mark Kuperberg & Feng Lin, 2019. "The Federal Reserve'S Dual Mandate And The Inflation‐Unemployment Tradeoff," Contemporary Economic Policy, Western Economic Association International, vol. 37(4), pages 641-651, October.
    17. Arnab Bhattacharjee & Sean Holly, 2015. "Influence, Interactions and Heterogeneity: Taking Personalities out of Monetary Policy Decision-making," Manchester School, University of Manchester, vol. 83(2), pages 153-182, March.
    18. Bakeev, M., 2022. "A compromise between formalism and realism as a way to influence economic policy," Journal of the New Economic Association, New Economic Association, vol. 57(5), pages 113-125.
    19. Hector Carcel-Villanova, 2022. "Text data analysis using Latent Dirichlet Allocation: an application to FOMC transcripts," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Machine learning in central banking, volume 57, Bank for International Settlements.

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • 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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