Modest Policy Interventions /
We present a framework for computing and evaluating linear projections of macro variables conditional on hypothetical paths of monetary policy. A modest policy intervention is a change in policy that does not significantly shift agents' beliefs about policy regime and does not generate quantita...
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- Elektronisch E-Book
- Sprache:
- Englisch
- Veröffentlicht:
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Cambridge, Mass.
National Bureau of Economic Research
2002.
- Zusammenfassung:
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We present a framework for computing and evaluating linear projections of macro variables conditional on hypothetical paths of monetary policy. A modest policy intervention is a change in policy that does not significantly shift agents' beliefs about policy regime and does not generate quantitatively important expectations-formation effects of the kind Lucas (1976) emphasizes. The framework is applied to an econometric model of U.S. postwar monetary policy behavior. It finds that a rich class of interventions routinely considered by the Federal Reserve are modest and their impacts can be reliably forecasted by an accurately identified linear model. Moreover, modest interventions can matter: they may shift the projected paths and probability distributions of macro variables in economically meaningful ways.
- Umfang:
- 1 online resource: illustrations (black and white);
- Anmerkungen:
- September 2002.
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