NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Estimating the Market-Perceived Monetary Policy Rule

James D. Hamilton, Seth Pruitt, Scott Borger

NBER Working Paper No. 16412
Issued in September 2010
NBER Program(s):   ME

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.

download in pdf format
   (330 K)

email paper

This paper is available as PDF (330 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w16412

Published: 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.

Users who downloaded this paper also downloaded these:
Christiano, Ilut, Motto, and Rostagno w16402 Monetary Policy and Stock Market Booms
Friedman and Kuttner w16165 Implementation of Monetary Policy: How Do Central Banks Set Interest Rates?
Bekaert, Hoerova, and Lo Duca w16397 Risk, Uncertainty and Monetary Policy
Taylor and Williams w15908 Simple and Robust Rules for Monetary Policy
Benigno and Paciello w16386 Monetary Policy, Doubts and Asset Prices
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us