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Full-Text Articles in Social and Behavioral Sciences
A Comparison Of Five Federal Reserve Chairmen: Was Greenspan The Best?, Ray C. Fair
A Comparison Of Five Federal Reserve Chairmen: Was Greenspan The Best?, Ray C. Fair
Cowles Foundation Discussion Papers
This paper examines the performances of the past five Federal Reserve chairmen using optimal control techniques and a macroeconometric model. Each chairman is evaluated in two ways. The first way is comparing the actual performance of the economy under his term relative to what the performance would have been had he behaved optimally. Comparing chairmen only on the basis of the actual performance of the economy is not appropriate because it does not control for different exogenous-variable values and shocks that the Fed has no control over. This comparison is done for a wide range of loss functions. It does …
Evaluating Inflation Targeting Using A Macroeconometric Model, Ray C. Fair
Evaluating Inflation Targeting Using A Macroeconometric Model, Ray C. Fair
Cowles Foundation Discussion Papers
This paper uses a structurally estimated macroeconometric model, denoted the MC model, to evaluate inflation targeting in the United States. Various interest rate rules are tried with differing weights on inflation and output, and various optimal control problems are solved using differing weights on inflation and output targets. Price-level targeting is also considered. The results show that 1) there are output costs to inflation targeting, especially for price shocks, 2) price-level targeting is dominated by inflation targeting, 3) the estimated interest rate rule of the Fed (in Table 4) is consistent with the Fed placing equal weights on inflation and …
Estimated, Calibrated, And Optimal Interest Rate Rules, Ray C. Fair
Estimated, Calibrated, And Optimal Interest Rate Rules, Ray C. Fair
Cowles Foundation Discussion Papers
Estimated, calibrated, and optimal interest rate rules are examined for their ability to dampen economic fluctuations caused by random shocks. A tax rate rule is also considered. The results show that the estimated interest rate rule used in the paper is stable for the period beginning in 1954 except for the early Volcker period, although more observations, especially high inflation ones, are needed before much confidence can be placed on the results. The models used for the stabilization results are large scale structural macroeconometric models, and some of the results differ from those based on small models. For example, rules …