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Journal Article
Evolving market perceptions of Federal Reserve policy objectives
Journal Article
The role of community banks in the U.S. economy
The U.S. banking system is unusual in consisting not only of some very large banks but also a large number of relatively small community banks. This bifurcated banking system in the United States has served the economy well. Over time, with regulatory change and financial innovation, large banks have become complex organizations engaged in a wide range of activities. They provide a variety of services to their customers, but often rely on hard financial information, computer models, and centralized decision-making as the basis for conducting business. In contrast, small banks have focused ...
Journal Article
What is the optimal inflation rate?
With inflation in the United States and elsewhere low by historical standards, the question of what inflation rate policymakers should aim for has moved front and center. Knowing what inflation rate to aim for is critically important for maximizing the economic well-being of the public. ; Most policymakers agree they should not allow inflation to fall below zero because the costs of deflation are thought to be high. They disagree, however, about how much above zero, if any, central banks should aim to keep inflation. Unfortunately, rigorous estimates of an "optimal inflation rate" have ...
Journal Article
Monetary Policy at the Zero Lower Bound: Revelations from the Summary of Economic Projections
George A. Kahn and Andrew Palmer assess how FOMC participants' projections that policy would lift off from its effective lower bound related to their projections for inflation and unemployment.
Journal Article
Does more money mean more bank loans?
Journal Article
International policy coordination in an interdependent world
Working Paper
The Taylor rule and the transformation of monetary policy
This paper examines the intellectual history of the Taylor Rule and its considerable influence on macroeconomic research and monetary policy. The paper traces the historical antecedents to the Taylor rule, emphasizing the contributions of three prominent advocates of rules--Henry Simons, A.W. H. Phillips, and Milton Friedman. The paper then examines the evolution of John Taylor's thinking as an academic and policy advisor leading up to his formulation of the Taylor rule. Finally, the paper documents the influence of the Taylor rule on macroeconomic research and the Federal Reserve's conduct ...
Journal Article
Estimated rules for monetary policy
Estimated policy rules describe how monetary policy has responded in the past to key economic indicators. Such rules can be used to evaluate past decisions and help guide the appropriate path for current policy. ; However, there may be unique features of a given economic situation?such as the current binding zero lower bound on interest rates and the desire to manage downside risk to economic activity?that warrant flexibility in following any rule based on past performance. ; Kahn estimates what rules best describe past monetary policies that coincided with periods of favorable economic ...
Working Paper
New estimates of the U.S. economy's potential growth rate
Using an Okun's law framework, this paper estimates potential growth for the 1990s as measured by both fixed-and chain-weighted indexes of GDP. Estimated potential growth rates are then decomposed into growth in labor productivity and growth in labor input using a regression analysis to separate secular from cyclical changes. Estimates of potential output and trend productivity growth for the 1990s are compared with estimates from earlier periods using both fixed and chain weights. ; The first section of the paper compares the behavior of output, productivity, and employment during the ...
Journal Article
Achieving price stability: a 1993 report card
The primary goal of Federal Reserve monetary policy is to foster maximum sustainable growth in the U.S. economy by achieving price stability over time. Although considerable progress toward price stability has been made since the early 1980s, inflation remains above the level most analysts would associate with price stability. Because price stability is the key contribution the Federal Reserve can make toward maximizing long-run growth and living standards in the United States, it is important for the Federal Reserve to remain vigilant in its efforts to keep inflation in check.> Kahn examines ...