IDEAS home Printed from https://ideas.repec.org/p/fip/fedbwp/16-11.html
   My bibliography  Save this paper

Does Fed policy reveal a ternary mandate?

Author

Listed:
  • Peek, Joe

    () (Federal Reserve Bank of Boston)

  • Rosengren, Eric S.

    () (Federal Reserve Bank of Boston)

  • Tootell, Geoffrey M. B.

    () (Federal Reserve Bank of Boston)

Abstract

This paper examines the role of financial instability in setting monetary policy. The paper begins with a model that examines the interaction of monetary and regulatory policy. It then empirically tests whether financial instability has affected monetary policy. One important innovation is to construct a measure of financial instability directly related to the FOMC financial instability concerns expressed in FOMC meeting transcripts. We find that, even after controlling for forecasts of inflation and unemployment, the word counts of terms related to financial instability do correlate with monetary policy decisions. Thus, the FOMC not only “talks the talk” about financial stability, but it “walks the walk.”

Suggested Citation

  • Peek, Joe & Rosengren, Eric S. & Tootell, Geoffrey M. B., 2016. "Does Fed policy reveal a ternary mandate?," Working Papers 16-11, Federal Reserve Bank of Boston.
  • Handle: RePEc:fip:fedbwp:16-11
    as

    Download full text from publisher

    File URL: https://www.bostonfed.org/publications/research-department-working-paper/2016/does-fed-policy-reveal-a-ternary-mandate.aspx
    File Function: Summary
    Download Restriction: no

    File URL: https://www.bostonfed.org/-/media/Documents/Workingpapers/PDF/wp1611.pdf
    File Function: Full text
    Download Restriction: no

    References listed on IDEAS

    as
    1. Ben S. Bernanke & Mark Gertler, 2001. "Should Central Banks Respond to Movements in Asset Prices?," American Economic Review, American Economic Association, vol. 91(2), pages 253-257, May.
    2. Joe Peek & Eric S. Rosengren & Geoffrey M. B. Tootell, 1999. "Is Bank Supervision Central to Central Banking?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(2), pages 629-653.
    3. Gilchrist, Simon & Leahy, John V., 2002. "Monetary policy and asset prices," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 75-97, January.
    4. Bernanke, Ben S, 1990. "Clearing and Settlement during the Crash," Review of Financial Studies, Society for Financial Studies, vol. 3(1), pages 133-151.
    5. Fuhrer, Jeff & Tootell, Geoff, 2008. "Eyes on the prize: How did the fed respond to the stock market?," Journal of Monetary Economics, Elsevier, vol. 55(4), pages 796-805, May.
    6. Adrian, Tobias & Boyarchenko, Nina, 2012. "Intermediary leverage cycles and financial stability," Staff Reports 567, Federal Reserve Bank of New York, revised 01 Feb 2015.
    7. Roberto Rigobon & Brian Sack, 2003. "Measuring The Reaction of Monetary Policy to the Stock Market," The Quarterly Journal of Economics, Oxford University Press, vol. 118(2), pages 639-669.
    8. Charles R. Bean, 2004. "Asset Prices, Financial Instability, and Monetary Policy," American Economic Review, American Economic Association, vol. 94(2), pages 14-18, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cadman, Timothy & Maraseni, Tek & Ma, Hwan Ok & Lopez-Casero, Federico, 2017. "Five years of REDD+ governance: The use of market mechanisms as a response to anthropogenic climate change," Forest Policy and Economics, Elsevier, vol. 79(C), pages 8-16.
    2. Green, Jemma & Newman, Peter, 2017. "Citizen utilities: The emerging power paradigm," Energy Policy, Elsevier, vol. 105(C), pages 283-293.

    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedbwp:16-11. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Catherine Spozio). General contact details of provider: http://edirc.repec.org/data/frbbous.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.