ABSTRACT
How is US monetary policy formulated? The Federal Reserve Act states the goals of monetary policy by specifying that, in conducting monetary policy, the Federal Open Market Committee (FOMC) should ‘promote effectively the goals of
maximum employment, stable prices, and moderate long-term interest rates’. There is, however, considerable debate among economists about translating these goals into a coherent description of US monetary policy. One reason for the debate is the secrecy surrounding the details of how such policy is formulated. Detailed information about the FOMC meetings is necessary to understand the conduct of US monetary policy; the FOMC transcripts offer such information. These transcripts, however, have only recently been made available to the public and we use them here to examine interdependencies between econometric models and policy makers.1
