Macroeconomic Stability and the Preferences of the Fed: A Formal Analysis, 1961-98

Favero, Carlo A.; Rovelli, Riccardo

doi:10.1353/mcb.2003.0028

Cited by 172 publications

(120 citation statements)

References 13 publications

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“…The results show that the model does a very good job of explaining economic outcomes during the 1980s and 1990s, and that its impulse response functions are consistent with the responses generated from estimated policy rules. We show that the Federal Reserve's policy objective function changed significantly in the early 1980s and compare our policy regime estimates to the estimates in Favero and Rovelli (2003) and Ozlale (2003).…”

Section: Introductionmentioning

confidence: 82%

The Policy Preferences of the U.S. Federal Reserve

Dennis¹

2004

ERWP

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In this paper we model and explain US macroeconomic outcomes subject to the discipline that monetary policy is set optimally. Exploiting the restrictions that come from optimal policymaking, we estimate the parameters in the Federal Reserve's policy objective function together with the parameters in its optimization constraints. For the period following Volcker's appointment as chairman, we estimate the implicit inflation target to be around 1.4% and show that policymakers assigned a significant weight to interest rate smoothing. We show that the estimated optimal policy provides a good description of US data for the 1980s and 1990s.

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Section: Introductionmentioning

confidence: 82%

The Policy Preferences of the U.S. Federal Reserve

Dennis¹

2004

ERWP

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“…This result does, however, find some support in the empirical literature. Dennis (2003) estimates the preference parameters of the Federal Reserve using full information maximum likelihood (FIML) for the period 1979–2000, and obtains estimates of (λ, ν) = (0.23, 12.3) 11 Favero and Rovelli (2003). use GMM for the period 1980–1998 and obtain (λ, ν) = (0.00125, 0.0085).…”

Section: Model and Estimationmentioning

confidence: 99%

New‐Keynesian Models and Monetary Policy: A Re‐examination of the Stylized Facts*

Söderström

Söderlind

Vredin

2005

Scandinavian J Economics

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Using an empirical New-Keynesian model with optimal discretionary monetary policy, we estimate key parameters-the central bank's preference parameters; the degree of forwardlooking behavior in the determination of inflation and output; and the variances of inflation and output shocks-to match some broad characteristics of U.S. data. The parameterization we obtain implies a small concern for output stability but a large preference for interest rate smoothing, and a small degree of forward-looking behavior in price-setting but a large degree of forward-looking in the determination of output. Our methodology also allows us to carefully examine the consequences of alternative parameterizations and to provide intuition for our results.

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“…Other studies show that the Fed's reaction function has changed over time. Favero and Rovelli (2003), in a study covering the period 1961−1998, find that the policy preferences of the Fed have changed drastically after 1979. Cukierman and Muscatelli (2008) find evidence of non-linearity in US interest-rate reaction functions, with substantial variations over sub-periods within the sample 1960-2005, several studies on the United States and other countries show the presence of asymmetry in the pass-through from policy rates to bank lending rates.…”

Section: Brief Literature Reviewmentioning

confidence: 99%

Are Housing Price Cycles Asymmetric? Evidence From the Us States and Metropolitan Areas

André

Gupta

Mwamba

2018

International Journal of Strategic Property Management

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This paper investigates asymmetry in US housing price cycles at the state and metropolitan statistical area (MSA) level, using the Triples test (Randles, Flinger, Policello, & Wolfe, 1980) and the Entropy test of Racine and Maasoumi (2007). Several reasons may account for asymmetry in housing prices, including non-linearity in their determinants and in behavioural responses, in particular linked to equity constraints and loss aversion. However, few studies have formally tested the symmetry of housing price cycles. We find that housing prices are asymmetric in the vast majority of cases. Taking into account the results of the two tests, deepness asymmetry, which represents differences in the magnitude of upswings and downturns, is found in 39 out of the 51 states (including the District of Columbia) and 238 out of the 381 MSAs. Steepness asymmetry, which measures differences in the speed of price changes during upswings and downturns, is found in 40 states and 257 MSAs. These results imply that linear models are in most cases insufficient to capture housing price dynamics.

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Macroeconomic Stability and the Preferences of the Fed: A Formal Analysis, 1961-98

Cited by 172 publications

References 13 publications

The Policy Preferences of the U.S. Federal Reserve

The Policy Preferences of the U.S. Federal Reserve

New‐Keynesian Models and Monetary Policy: A Re‐examination of the Stylized Facts*

Are Housing Price Cycles Asymmetric? Evidence From the Us States and Metropolitan Areas

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