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Output Gap Uncertainty and Monetary Policy During the 1970s
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David E. Spencer
Veröffentlicht/Copyright:
5. Februar 2004
Abstract
The conduct of monetary policy during the 1970s was greatly complicated by systematic real-time misperceptions of the state of economic activity as measured by the output gap. Employing real-time data and using the Taylor rule as an analytical framework, I explore the implications of utilizing alternative observable proxies for the unobservable output gap. I compare the counterfactual paths for the federal funds rate generated under each proxy with the actual path of the federal funds rate and a benchmark ( "ideal" ) path implied by a full information Taylor rule. Results suggest that these real-time proxies would have resulted in better policy outcomes than actually occurred. Indeed, the federal funds rate path that comes closest to the ideal path occurs when the estimate of the output gap is taken to be zero (its steady-state value) at every point in time. This is equivalent to ignoring output gap information in monetary policy decisions.
Published Online: 2004-02-05
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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- Contributions Article
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- Dissemination of Technology in Market and Planned Economies
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- Topics Article
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- The UK Household Sector Demand for Risky Money
- The Relationship between Stock Prices, House Prices and Consumption in OECD Countries
- Labor Market Performance and Flexibility: Which Comes First?
- A Simple Locally Interactive Model of Ergodic and Nonergodic Growth
- Do Minimum Wages Raise the NAIRU?
- Strictly Endogenous Growth with Non-renewable Resources Implies an Unbounded Growth Rate
- Creative Destruction and Policy in a Model of Endogenous Growth
- Intergenerational Habits, Fiscal Policy, and Welfare
- Output Composition of the Monetary Policy Transmission Mechanism in Japan
- Socio-Cultural Variables and Economic Success: Evidence from Italian Provinces 1951-1991
- Monetary Policy and the Information Content of the Yield Spread
- The Dynamics of Fertility and Growth: Baby Boom, Bust and Bounce-Back
- Imbalance Effects in the Lucas Model: an Analytical Exploration
- Assessing Aggregate Tests of Efficiency for Dynamic Economies
- The Output Gap, Expected Future Inflation and Inflation Dynamics: Another Look
- Unions and Workforce Adjustment Costs
Artikel in diesem Heft
- Advances Article
- Price Stability and Monetary Policy Effectiveness when Nominal Interest Rates are Bounded at Zero
- Contributions Article
- Aggregate Price Changes and Dispersion: A Comparison of the Equity and Goods and Services Markets
- Dissemination of Technology in Market and Planned Economies
- Interest-Rate Smoothing: Monetary Policy Inertia or Unobserved Variables?
- Is the U.S. Aggregate Production Function Cobb-Douglas? New Estimates of the Elasticity of Substitution
- What Does It Take to Explain Procyclical Productivity?
- Endogenous Distribution, Politics, and the Growth-Equity Tradeoff
- Explaining Speculative Expansions
- Tariffs, Entry Regulation and Markups: Country Size Matters
- Schumpeterian Growth, North-South Trade and Wage Rigidity
- Do Federal Reserve Policy Surprises Reveal Superior Information about the Economy?
- Bailouts and Bank Runs in a Model of Crony Capitalism
- Multiple Equilibria in Heterogeneous Expectations Models
- Topics Article
- Empirical Perspectives on Long-Term External Debt
- Output Gap Uncertainty and Monetary Policy During the 1970s
- The UK Household Sector Demand for Risky Money
- The Relationship between Stock Prices, House Prices and Consumption in OECD Countries
- Labor Market Performance and Flexibility: Which Comes First?
- A Simple Locally Interactive Model of Ergodic and Nonergodic Growth
- Do Minimum Wages Raise the NAIRU?
- Strictly Endogenous Growth with Non-renewable Resources Implies an Unbounded Growth Rate
- Creative Destruction and Policy in a Model of Endogenous Growth
- Intergenerational Habits, Fiscal Policy, and Welfare
- Output Composition of the Monetary Policy Transmission Mechanism in Japan
- Socio-Cultural Variables and Economic Success: Evidence from Italian Provinces 1951-1991
- Monetary Policy and the Information Content of the Yield Spread
- The Dynamics of Fertility and Growth: Baby Boom, Bust and Bounce-Back
- Imbalance Effects in the Lucas Model: an Analytical Exploration
- Assessing Aggregate Tests of Efficiency for Dynamic Economies
- The Output Gap, Expected Future Inflation and Inflation Dynamics: Another Look
- Unions and Workforce Adjustment Costs
