Journal Article

Actual Federal Reserve policy behavior and interest rate rules

Abstract: A popular way to approximate Federal Reserve policy is through the use of estimated interest rate equations, or policy \\"rules.\\" In these rules, the dependent variable is the interest rate that the Federal Reserve is assumed to control and the explanatory variables are those factors assumed to affect Federal Reserve behavior. This article presents estimates of such a rule, using data from 1954:1-1999:3 but omitting the 1979:4-1982:3 period, when monetary targets were emphasized. Although the estimated coefficient on inflation is found to be larger in the post-1982 period, the difference is not statistically significant, and statistical tests fail to reject the hypothesis that the interest rate rule is stable across these two periods.

Keywords: Monetary policy - United States; Interest rates;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Economic Policy Review

Publication Date: 2001

Issue: Mar

Pages: 61-72

Order Number: v.7 no.1