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Using an evolving criterion to assess the Federal Reserve's behaviour in recent years

  • Davide Ferrari

    ()

    (University of Minnesota, School of Statistics, Minneapolis {USA))

  • Antonio Ribba

    ()

    (UniversitĂ  degli Studi di Modena e Reggio Emilia, Dipartimento di Economia Politica, Modena (Italy))

The aim of this paper is to analyse the behaviour of the Federal Reserve in the Greenspan era by using recently developed neuro-fuzzy techniques. Such models require the operation assumptions concerning the conduct of monetary policy to be set in the form of flexible rules. Moreover, the approach allows an adaptive model to be built, thus pointing out the role played by the evolution of the monetary policy decision mechanism. Besides the usual set of macro-economic variables, the input data set includes a stock market indicator. Our results show that the simulated series offederal funds rate mimics almost perfectly the actual behaviour of the monetary policy instrument.

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File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9859/9741
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Article provided by Banca Nazionale del Lavoro in its journal Banca Nazionale del Lavoro Quarterly Review.

Volume (Year): 58 (2005)
Issue (Month): 235 ()
Pages: 169-186

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Handle: RePEc:psl:bnlqrr:2005:32
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  1. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999. "Monetary policy shocks: What have we learned and to what end?," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148 Elsevier.
  2. Douglas Staiger & James H. Stock & Mark W. Watson, 1997. "The NAIRU, Unemployment and Monetary Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 33-49, Winter.
  3. Clarida, Richard & GalĂ­, Jordi & Gertler, Mark, 1997. "Monetary Policy Rules in Practice: Some International Evidence," CEPR Discussion Papers 1750, C.E.P.R. Discussion Papers.
  4. Roberto Rigobon & Brian Sack, 2001. "Measuring the Reaction of Monetary Policy to the Stock Market," NBER Working Papers 8350, National Bureau of Economic Research, Inc.
  5. Athanasios Orphanides, 2001. "Monetary Policy Rules Based on Real-Time Data," American Economic Review, American Economic Association, vol. 91(4), pages 964-985, September.
  6. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
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