Monetary Policy Rules, Macroeconomic Stability, and Inflation: A View from the Trenches

Orphanides, Athanasios

doi:10.1353/mcb.2004.0013

Cited by 336 publications

(388 citation statements)

References 55 publications

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“…For the estimation of the forward looking Taylor rule, we will employ inflation expectations data from the Survey of Professional Forecasters (SPF). Regarding the output gap, we follow Orphanides (2004) and rely on real-time instead of revised data.…”

Section: Empirical Analysismentioning

confidence: 99%

Explaining inflation-gap persistence by a time-varying Taylor rule

Conrad¹,

Eife²

2012

Journal of Macroeconomics

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Section: Empirical Analysismentioning

confidence: 99%

Explaining inflation-gap persistence by a time-varying Taylor rule

Conrad¹,

Eife²

2012

Journal of Macroeconomics

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“…We investigate the hypothesis that much of the great inflation was due to a misperception on the part of economic actors-both the private sector and the Federal Reserve-concerning the trend pace of productivity growth. This hypothesis is associated most closely (and most recently) with Orphanides (2000Orphanides ( , 2001Orphanides ( , 2002Orphanides ( , 2003. The broad idea is that it was initially very difficult for the economy's participants to detect that the productivity slowdown had occurredthat is, agents had to learn about it.…”

Section: The Great Inflation and The Productivity Slowdownmentioning

confidence: 99%

“…Better policy rules might be designed, but they would have to take into account the possibility that the productivity growth rate may be subject to significant but rare changes in mean. 26 If we take the view that the model is a reasonable approximation of the economy, the overly persistent response of inflation might be understood as evidence that the Taylor-type policy rule changed in some way after the 1970s. 27 We consider just one possible change, namely that the central bank credibly changes the inflation target to two percent in 1980.…”

Section: Inflationmentioning

confidence: 99%

“…The intuition behind Figure 4 is that the exogenous growth assumption combined with learning produces average growth rates for the model economy which fit the data 25 Despite the appearances of the figure, it would eventually converge back to the steady state rate of four percent-but that process takes many years. 26 For a discussion of optimal policy in a much simpler but related context of this type, see Bullard and Schaling (2002). 27 Possible changes could be a downward shift in the inflation target, as in Huh and Lansing (1999) and Erceg and Levin (2001), or a change in the parameters of the Taylor rule.…”

Section: Output Growthmentioning

confidence: 99%

“…27 Possible changes could be a downward shift in the inflation target, as in Huh and Lansing (1999) and Erceg and Levin (2001), or a change in the parameters of the Taylor rule. Orphanides (2001) suggests that the coefficient on the output gap has decreased after the 1980. Also, Clarida, Gali and Gertler (2000) find that the inflation coefficient is higher in the post-Volker sample.…”

Section: Output Growthmentioning

confidence: 99%

See 2 more Smart Citations

Did the great inflation occur despite policymaker commitment to a Taylor rule?

Bullard

Eusepi

2005

Review of Economic Dynamics

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We study the hypothesis that misperceptions of trend productivity growth during the onset of the productivity slowdown in the U.S. caused much of the great inflation of the 1970s. We use the general equilibrium, sticky price framework of Woodford (2003), augmented with learning using the techniques of Evans and Honkapohja (2001). We allow for endogenous investment as well as explicit, exogenous growth in productivity and the labor input. We assume the monetary policymaker is committed to using a Taylortype policy rule. We study how this economy reacts to an unexpected change in the trend productivity growth rate under learning. We find that a substantial portion of the observed increase in inflation during the 1970s can be attributed to this source. JEL Classification Numbers E4, E5.

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Financial Cycle, Business Cycle and Monetary Policy: Evidence from Four Major Economies

Yong

Zhang

2016

Int. J Fin Econ

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Economists used to think that financial factors are not important in the business cycle, but the 2008 global financial crisis has made it apparent that financial cycle plays a much larger role in macroeconomic dynamics than anticipated. Against this background, economists endeavor to introduce financial factors into macroeconomic models. In this paper, we incorporate financial cycle into a four‐equation model to study the linkages and interactions between financial cycle, business cycle and monetary policy. The results suggest that financial cycle plays a significant role in the business cycle, and that financial cycle shock has become a main driving force for macroeconomic fluctuations, especially during times of financial instability. In addition, by comparing the performance of the finance‐augmented Taylor rule with that of the conventional Taylor rule, we find that both the financial system and the real economy will be better stabilized under the finance‐augmented Taylor rule. This result adds new evidence to the argument that monetary policy has an important role in safeguarding the financial system and that financial stability should be adopted as a target for monetary policy. Copyright © 2016 John Wiley & Sons, Ltd.

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Monetary Policy Rules, Macroeconomic Stability, and Inflation: A View from the Trenches

Cited by 336 publications

References 55 publications

Explaining inflation-gap persistence by a time-varying Taylor rule

Explaining inflation-gap persistence by a time-varying Taylor rule

Did the great inflation occur despite policymaker commitment to a Taylor rule?

Financial Cycle, Business Cycle and Monetary Policy: Evidence from Four Major Economies

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