Monetary policy and stability during six periods in US economic history: 1959–2008: a novel, nonlinear monetary policy rule

We investigate the monetary policy of the Federal Reserve Board during six periods in US economic history 1959–2008. In particular, we examine the Fed's response to changes in three guiding variables: inflation, π, unemployment, U, and industrial production, y, during periods with low and high...

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Bibliographic Details
Published in:Journal of policy modeling 2013-03, Vol.35 (2), p.307-325
Main Authors: Seip, Knut L., McNown, Robert
Format: Article
Language:English
Subjects:
Economic history
Economic stability
Federal Reserve monetary policy
Industrial production
Inflation
Monetary policy
Monetary policy rule
Nonlinear methods
Studies
Taylor rule
Unemployment
USA
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Summary:We investigate the monetary policy of the Federal Reserve Board during six periods in US economic history 1959–2008. In particular, we examine the Fed's response to changes in three guiding variables: inflation, π, unemployment, U, and industrial production, y, during periods with low and high economic stability. We identify separate responses for the Fed's change in interest rate depending upon (i) the current rate, FF, and the guiding variables’ level below or above their average values and (ii) recent movements in inflation and unemployment. The change in rate, ΔFF, can then be calculated. We identify policies that both increased and decreased economic stability.
ISSN:0161-8938
1873-8060
DOI:10.1016/j.jpolmod.2012.03.004