Historical monetary policy analysis and the Taylor rule

By Athanasios Orphanides. 2003

558 citations recorded by the source corpus.

This study examines the usefulness of the Taylor-rule framework as an organizing device for describing the policy debate and evolution of monetary policy in the United States. Monetary policy during the 1920s and since the 1951 Treasury-Federal Reserve Accord can be broadly interpreted in terms of this framework with rather surprising consistency. In broad terms, during these periods policy has been generally formulated in a forward-looking manner with price stability and economic stability serving as implicit or explicit guides. As early as the 1920s, measures of real economic activity relative to "normal" or "potential" supply appear to have influenced policy analysis and deliberations. Confidence in such measures as guides for activist monetary policy proved counterproductive at times, resulting in excessive activism, such as during the Great Inflation and at the brink of the Great Depression. Policy during the past two decades is broadly consistent with natural-growth targeting variants of the Taylor rule that exhibit less activism.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/1528ce385ff137c85bf005b780c5c74b52a7c166

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Citations in the corpus

Expectations, Bond Yields and Monetary Policy (2005, unknown): “Orphanides ( 2003 ) promotes the adoption of a growth rate targeting rule augmented with the lagged interest rate and illustrates a forecast - based version using survey data .”
Shocks and Frictions in Us Business Cycles: A Bayesian DSGE Approach (2007, unknown): “These results are consistent with the findings of Athanasios Orphanides (2003), who shows, using real-time data estimates, that what has changed in US monetary policy behavior since the early 1980s is the relative response to output.”
Why are Target Interest Rate Changes so Persistent (2012, background): “As emphasized by Orphanides (2003), controlling for the real-time information available to central bankers, particularly in terms of measurements of the output gap, can significantly affect the historical interpretation of policy decisions.”
How Important is Money in the Conduct of Monetary Policy (2006, unknown): “This is in fact the explanation of the U.S.’s “Great Inflation” of the 1970s proposed by Orphanides (2003a, 2003b).”
The macroeconomic effects of monetary policy: a new measure for the United Kingdom (2014, methodology): “Orphanides (2001, 2003) and Molodtsova, Nikolsko-Rzhevskyy, and Papell (2008) show that estimated monetary policy reaction functions based on ex-post revised data are considerably different when using real-time data.9 We apply the Romer and Romer (2004) approach to identify monetary policy…”
The relevance of real-time data in estimating reaction functions for the Euro area (2005, unknown): “4 Orphanides (2003), p. 984.”
Commodity-price comovement and global economic activity (2020, methodology): “Thus, the factor structure of commodity prices predicted by theory suggests a way that the IC factor can help to resolve the identification problem associated with the joint determination of global economic activity and commodity prices.”
Monetary policy matters: Evidence from new shocks data (2013, result): “This suggests that Romer and Romer's reaction function, that assumes constant coefficients across the whole sample, could be misspecified.(10) These results are in line with those of Boivin and Giannoni (2006), who undertake a similar exercise for a small structural VAR similar to the systems discus”
A Shadow Policy Rate to Calibrate US Monetary Policy at the Zero Lower Bound (2014, unknown): “Orphanides (2003) and Kahn (2012) compared Taylor rules estimated using different vintages of data and uncovered substantial differences among these, even within the original sample period of Taylor (1993). aThe black lines refer to the estimated shadow federal funds rate and the grey line refers…”
Fluctuating Macro Policies and the Fiscal Theory [with Comments and Discussion] (2005, unknown): “12Orphanides (2003b) argues that the poor U.S. inflation performance from 1965-1979 was due to a strong policy response to poor estimates of the output gap available at the time, rather than a weak response to inflation. Using real-time data on the gap and inflation, he claims the fit of a conventio”
Opting Out of the Great Inflation: German Monetary Policy after the Break Down of Bretton Woods (2009, unknown): “Taylor (1999) and more recently, Orphanides (2003) and Kilponen and Leitemo (2008) have discussed the implications of targeting money growth for a central bank which sets the short-term interest rate.”
Practical Model-Based Monetary Policy Analysis: A How-To Guide (2006, background): “This is significantly below the estimates provided by Orphanides (2003) and reflects an argument that this parameter is”