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Federal Reserve information during the great moderation

Author

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  • Karl Whelan
  • Antonello D'Agostino

Abstract

Using data from the period 1970-1991, Romer and Romer (2000) showed that Federal Reserve forecasts of inflation and output were superior to those provided by commercial forecasters. In this paper, we show that this superior forecasting performance deteriorated after 1991. Over the decade 1992-2001, the superior forecast accuracy of the Fed held only over a very short time horizon and was limited to its forecasts of inflation. In addition, the performance of both the Fed and the commercial forecasters in predicting inflation and output, relative to that of “naive” benchmark models, dropped remarkably during this period.

Suggested Citation

  • Karl Whelan & Antonello D'Agostino, 2008. "Federal Reserve information during the great moderation," Open Access publications 10197/252, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:oapubs:10197/252
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    File URL: http://hdl.handle.net/10197/252
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    References listed on IDEAS

    as
    1. Ben S. Bernanke, 2006. "Reflections on the yield curve and monetary policy," Speech 175, Board of Governors of the Federal Reserve System (U.S.).
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    6. David H. Romer & Christina D. Romer, 2000. "Federal Reserve Information and the Behavior of Interest Rates," American Economic Review, American Economic Association, vol. 90(3), pages 429-457, June.
    7. James H. Stock & Mark W. Watson, 2007. "Why Has U.S. Inflation Become Harder to Forecast?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 3-33, February.
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    More about this item

    Keywords

    Board of Governors of the Federal Reserve System (U.S.); Inflation (Finance); Economic forecasting;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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