Dennis, R. (2004) Inferring policy objectives from economic outcomes. Oxford Bulletin of Economics and Statistics, 66(Sup 1), pp. 735-764. (doi: 10.1111/j.1468-0084.2004.100_1.x)
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Abstract
Estimated policy rules are reduced-form equations that are silent on many important policy questions. However, a structural understanding of monetary policy can be obtained by estimating a policymaker's objective function. The paper derives conditions under which the parameters in a policymaker's policy objective function can be identified and estimated. We apply these conditions to a New Keynesian sticky-price model of the US economy. The results show that the implicit inflation target and the relative weight placed on interest rate smoothing both declined when Paul Volcker was appointed Federal Reserve chairman.
Item Type: | Articles |
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Status: | Published |
Refereed: | Yes |
Glasgow Author(s) Enlighten ID: | Dennis, Professor Richard |
Authors: | Dennis, R. |
College/School: | College of Social Sciences > Adam Smith Business School > Economics |
Journal Name: | Oxford Bulletin of Economics and Statistics |
Publisher: | Wiley |
ISSN: | 0305-9049 |
ISSN (Online): | 1468-0084 |
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