Evaluating Monetary Policy Options

Abstract

We present a procedure for evaluating ex ante the effects of alternative paths of a monetary policy tool (the federal funds rate in our illustrations) on output and the price level within a variant of a widely-used vector autoregressive model of the U.S. economy.This exercise is a supplement to, or even an alternative to, analysis that relies on a particular structural model. Illustrations of the method are provided by evaluating the effects of changes in the funds rate target. Additionally, the Taylor rule is used to generate target funds rates for different target inflation rates, and the effects of these are evaluated.

Inflation Forecast Targeting: An Alternative Approach to Estimating the Inflation‐Output Variability Tradeoff

“… evaluated the effects of changes in the target funds rate beginning in 1990 and in 1994–1995. Using a different empirical model that employed a richer specification of the reserves market than Leeper and Zha, compared with no‐change policies the effects of specified changes in the target federal funds rate on the time paths of output, the price level, and other model variables in 1995, and again in 1998. In contrast to these two studies, which computed “own” shocks to the funds rate required to achieve an arbitrary target funds rate, the current article computes the shocks to the funds rate required to generate the time path of the funds rate that achieves an inflation target.…”

Market Power in the Poultry Sector in Turkey

“…Comparing the forecasted prices (without the change) with the actual prices provides a measure of the change impact. The historical decomposition graphs are based on partitioning the moving average series into two parts: 4where is the multivariate stochastic process for an agricultural price, U is its multivariate noise process, X is the deterministic part of , and s is a counter for the number of time periods (RATS, 2006;Fackler and McMillin, 2002). The first sum represents that part of due to innovations that drive the joint behavior of prices for the period t+1 to t+j, the horizon of interest.…”