Jointly Evaluating GDP and Inflation Forcasts in the Context of the Taylor Rule
This paper evaluates the potential impact of forecast errors on policy. We jointly evaluate the Federal Reserve staff forecasts of U.S. real output growth and the inflation rate in the context of the Taylor (1993) monetary policy rule. Our simple methodology generates policy forecast errors which have a direct interpretation for the impact of forecast errors on policy. Without interest rate smoothing, we find that, on average, Fed policy based on the Taylor rule would have been approximately a full percentage point away from the intended target because of errors in forecasting output growth and inflation.
|Date of creation:||Jun 2009|
|Contact details of provider:|| Web page: http://www.gwu.edu/~iiep/|
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:gwi:wpaper:2008-05. 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: (Kyle Renner)
If references are entirely missing, you can add them using this form.