Estimating the Market-Perceived Monetary Policy Rule
We introduce a novel method for estimating a monetary policy rule using macroeconomic news. We estimate directly the policy rule agents use to form their expectations by linking news' effects on forecasts of both economic conditions and monetary policy. Evidence between 1994 and 2007 indicates that the market-perceived Federal Reserve policy rule changed: the output response vanished, and the inflation response path became more gradual but larger in long-run magnitude. These response coefficient estimates are robust to measurement and theoretical issues with both potential output and the inflation target.
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Copy CitationJames D. Hamilton, Seth Pruitt, and Scott Borger, "Estimating the Market-Perceived Monetary Policy Rule," NBER Working Paper 16412 (2010), https://doi.org/10.3386/w16412.
Published Versions
James D. Hamilton & Seth Pruitt & Scott Borger, 2011. "Estimating the Market-Perceived Monetary Policy Rule," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(3), pages 1-28, July. citation courtesy of 
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