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The Greenbook and U.S. Monetary Policy

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  • Mr. Robert Tchaidze

Abstract

Although very attractive both theoretically and empirically, Taylor rules imply mechanical responses by the policy variable (interest rate) to fundamental ones (inflation and output gap). This study looks for empirical evidence of a more sophisticated monetary policy, one which takes into account expected future developments. An important piece of information added is the "Greenbook" forecast series, calculated by the Federal Reserve staff and which allow evaluation of expected inflation shocks. These shocks are significant in the estimated Taylor rule, confirming that policymaking is forward looking. This paper also demonstrates that a simple Taylor rule may be a misspecification if policymakers have in mind a timevarying inflation target.

Suggested Citation

  • Mr. Robert Tchaidze, 2004. "The Greenbook and U.S. Monetary Policy," IMF Working Papers 2004/213, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2004/213
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    References listed on IDEAS

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    1. Robert R Tchaidze, 2001. "Estimating Taylor Rules in a Real Time Setting," Economics Working Paper Archive 457, The Johns Hopkins University,Department of Economics.
    2. Svensson, Lars E. O., 1997. "Inflation forecast targeting: Implementing and monitoring inflation targets," European Economic Review, Elsevier, vol. 41(6), pages 1111-1146, June.
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    Cited by:

    1. Narayan Kundan Kishor & Monique Newiak, 2014. "The Instability In The Monetary Policy Reaction Function And The Estimation Of Monetary Policy Shocks," Contemporary Economic Policy, Western Economic Association International, vol. 32(2), pages 390-402, April.
    2. Igor Goncharov & Vasso Ioannidou & Martin C. Schmalz, 2017. "(Why) Do Central Banks Care About Their Profits?," CESifo Working Paper Series 6546, CESifo.

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