American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Estimating the Market-Perceived Monetary Policy Rule
American Economic Journal: Macroeconomics
vol. 3,
no. 3, July 2011
(pp. 1–28)
Abstract
We introduce a novel method for estimating a monetary policy rule using macroeconomic news. We estimate directly the policy rule agents use to form their expectations by linking news' effects on forecasts of both economic conditions and monetary policy. Evidence between 1994 and 2007 indicates that the market-perceived Federal Reserve policy rule changed: the output response vanished, and the inflation response path became more gradual but larger in long-run magnitude. These response coefficient estimates are robust to measurement and theoretical issues with both potential output and the inflation target. (JEL C51, E31, E43, E52, E58)Citation
Hamilton, James D., Seth Pruitt, and Scott Borger. 2011. "Estimating the Market-Perceived Monetary Policy Rule." American Economic Journal: Macroeconomics, 3 (3): 1–28. DOI: 10.1257/mac.3.3.1Additional Materials
JEL Classification
- C51 Model Construction and Estimation
- E31 Price Level; Inflation; Deflation
- E43 Interest Rates: Determination, Term Structure, and Effects
- E52 Monetary Policy
- E58 Central Banks and Their Policies
There are no comments for this article.
Login to Comment