The Fed’s Conduct of Monetary Policy: Has it Changed and Does it Matter?
نویسنده
چکیده
This paper investigates changes in the conduct of U.S. monetary policy. Monetary policy is modeled in the context of the Bernanke-Mihov (1998) structural VAR (SVAR) extended to allow explicitly for the Fed’s forward looking behavior. This is achieved by including its realtime forecasts on in‡ation and unemployment (the “Greenbook” forecasts). Stability tests that exploit the SVAR identifying restrictions indicate signi...cant time variation in the policy response to the state of the economy. Moreover, the estimation of a ‡exible time varying parameter model on the implied policy reaction function suggests an important shift toward a greater response to in‡ation relative to unemployment. A counterfactual simulation exercize shows that the identi...ed changes in systematic monetary policy have a signi...cant e¤ect on real activity, but do not appear to be at the origin of business cycle ‡uctuations. JEL classi...cation: E52, C32, C50
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