Monetary policy and stability during six periods in US economic history: 1959–2008: a novel, nonlinear monetary policy rule
Journal article, Peer reviewed
N o t i c e: this is the author’s version of a work that was accepted for publication in journal of policy modeling. changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. changes may have been made to this work since it was submitted for publication. a definitive version was subsequently published in journal of policy modeling, http://dx.doi.org/10.1016/j.jpolmod.2012.03.004.
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Original versionSeip, K.L. & McNown, R. (2012). Monetary policy and stability during six periods in US economic history: 1959–2008: a novel, nonlinear monetary policy rule. Journal of Policy Modeling (In Press, Corrected Proof). http://dx.doi.org/10.1016/j.jpolmod.2012.03.004
We investigate the monetary policy of the Federal Reserve Board during six periods in US economic history 1959–2008. In particular, we examine the Fed’s response to changes in three guiding variables: inflation, π, unemployment, U, and industrial production, y, during periods with low and high economic stability. We identify separate responses for the Fed’s change in interest rate depending upon (i) the current rate, FF, and the guiding variables’ level below or above their average values and (ii) recent movements in inflation and unemployment. The change in rate, FF, can then be calculated. We identify policies that both increased and decreased economic stability.