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On the information content of asymmetric FOMC policy statements: evidence from a Taylor-rule perspective

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  • Michael R. Pakko

Abstract

Over the past two decades, the FOMC has included in its policy decisions a statement of bias toward subsequent tightening or easing of policy. This paper examines the predictive content of these statements in a Taylor-rule setting, finding that they convey information that is useful for forecasting changes in the federal funds rate target, even after controlling for policy responses to inflation and the output gap. Moreover, the evidence suggests that this asymmetry can be represented in terms of shifts to the parameters of the Taylor-rule equation, indicating a greater or lesser degree of responsiveness to incoming information about inflation and output.

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  • Michael R. Pakko, 2003. "On the information content of asymmetric FOMC policy statements: evidence from a Taylor-rule perspective," Working Papers 2003-016, Federal Reserve Bank of St. Louis.
    • Handle: RePEc:fip:fedlwp:2003-016
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    References listed on IDEAS

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    1. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(1), pages 147-180.
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    7. Robert H. Rasche & Daniel L. Thornton, 2002. "The FOMC's balance-of-risks statement and market expectations of policy actions," Review, Federal Reserve Bank of St. Louis, vol. 84(Sep), pages 37-50.
    8. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1.
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    More about this item

    Keywords

    Monetary policy; Federal Open Market Committee;

    JEL classification:

    • 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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