Whose monetary policy is it anyway?

Article Abstract:

Empirical evidence shows that the Federal Open Market Committee (FOMC) considers the public's wishes in formulating its policies. A model that estimates changes in the stance of monetary policy as a function of the expected future values of the FOMC's goals and the public's desired monetary policy was developed to test whether the agency adjusts its policies according to the public's tastes. Results confirmed this hypothesis and provided support that the desires of the public and those of the policymaker cannot agree. Nonetheless, it is the public who decides the ultimate objectives of monetary policy.

Other General Government Support, Coinage & Currency, Laws, regulations and rules, Money, United States. Federal Open Market Committee

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Inflation, financial markets and long-run real activity

Article Abstract:

Empirical evidence indicates that banks and secondary capital markets play a critical allocative function. In this setting, real activity is positively correlated with the volume of bank lending activity and the volume of trading in equity markets. In addition, inflation and the real rate of return on equity are negatively associated, as are inflation and financial market activity. These long-run relationships among inflation, real activity and financial market conditions are consistent with the predictions of a monetary growth model.

Commercial Banks, Commercial Banking, Bank Loanable Funds, Capital market, Capital markets, Financial markets, Bank loans, Loanable funds (Banks)

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Optimal monetary policy rules in a rational expectations model of the Phillips curve

Article Abstract:

Optimal monetary policy rules are derived under both discretion and commitment using a rational expectations framework based on a Phillips curve with persistence in inflation. The model assumes that the central bank focuses on the natural rate of production, thereby eliminating incentives that generate an average inflation bias. It is shown that inflation exhibits less persistence and more conditional variability with commitment, which is the opposite in the case of output with discretion.

Econometrics & Model Building, Econometrics, Rational expectations (Economics), Business models, Phillips curve

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