chapter  13
16 Pages

The Fed’s monetary policy rule: Past, present, and future

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There are now a number of papers which derive optimal monetary policy rules in the context of structural macroeconomic models.1 One common feature of these works is that the resulting reduced form coefficients in the policy rule are composed of two sets of structural parameters, some pertaining to the monetary authority’s loss function and others describing the behavior of the private sector. While these papers derive normative prescriptions about the monetary authority behavior, very few estimates of the deep parameters in the monetary authority’s loss function are available in the literature. The present chapter provides such estimates.