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Expectations and the effects of monetary policy

Author

Listed:
  • Laurence Ball
  • Dean Croushore

Abstract

This paper examines the predictive power of shifts in monetary policy, as measured by changes in the real federal funds rate, for output, inflation, and survey expectations of these variables. The authors find that policy shifts have larger effects on actual output than on expected output, suggesting that agents underestimate the effects of policy on aggregate demand. Their results help explain the real effects of monetary policy, and they provide negative evidence on the rationality of expectations.

Suggested Citation

  • Laurence Ball & Dean Croushore, 1998. "Expectations and the effects of monetary policy," Working Papers 98-13, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:98-13
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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