International Finance Discussion Papers: The Market-Perceived Monetary Policy Rule

by , ,

We introduce a novel method for estimating a monetary policy rule using macroeconomic news. Market forecasts of both economic conditions and monetary policy are affected by news, and our estimation links the two effects. This enables us to estimate directly the policy rule agents use to form their expectations, and in so doing flexibly capture the particular dynamics of policy response. We find evidence that between 1994 and 2007 the market-perceived Federal Reserve policy rule changed: the output response vanished, and the ...

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International Finance Discussion Papers: The Market-Perceived Monetary Policy Rule 2013, Bibliogov

ISBN-13: 9781288725304

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