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This paper develops a generalization of the formulas proposed by Kuttner (2001) and others for purposes of measuring the effects of a change in the federal funds target on Treasury yields of different maturities. The generalization avoids the need to condition on the date of the target change and allows for deviations of the effective fed funds rate from the target as well as gradual learning by market participants about the target. The paper shows that parameters estimated solely on the basis of the behavior of the fed funds and fed funds futures can account for the broad calendar regularities in the relation between fed funds futures and Treasury yields of different maturities. Although the methods are new, the conclusion is quite similar to that reported by earlier researchers—changes in the fed funds target seem to be associated with quite large changes in Treasury yields, even for maturities of up to 10 years. [ABSTRACT FROM AUTHOR]

Monetary policy analysts often rely on rules of thumb, such as the Taylor rule, to describe historical monetary policy decisions and to compare current policy with historical norms. Analysis along these lines also permits evaluation of episodes where policy may have deviated from a simple rule and examination of the reasons behind such deviations. One interesting question is whether such rules of thumb should draw on policymakers' forecasts of key variables, such as inflation and unemployment, or on observed outcomes. Importantly, deviations of the policy from the prescriptions of a Taylor rule that relies on outcomes may be the result of systematic responses to information captured in policymakers' own projections. This paper investigates this proposition in the context of Federal Open Market Committee (FOMC) policy decisions over the past 20 years, using publicly available FOMC projections from the semiannual monetary policy reports to Congress (Humphrey-Hawkins reports). The results indicate that FOMC decisions can indeed be predominantly explained in terms of the FOMC's own projections rather than observed outcomes. Thus, a forecast-based rule of thumb better characterizes FOMC decisionmaking. This paper also confirms that many of the apparent deviations of the federal funds rate from an outcome-based Taylor-style rule may be considered systematic responses to information contained in FOMC projections. [ABSTRACT FROM AUTHOR]

This paper estimates a Bayesian vector autoregression for the U.S. economy that includes a housing sector and addresses the following questions: Can developments in the housing sector be explained on the basis of developments in real and nominal gross domestic product and interest rates? What are the effects of housing demand shocks on the economy? How does monetary policy affect the housing market? What are the implications of house price developments for the stance of monetary policy? Regarding the latter question, we implement a Céspedes et al. (2006) version of a monetary conditions index. [ABSTRACT FROM AUTHOR]

This paper, using extensive archival material from several countries, brings together scattered information about Milton Friedman's views and predictions regarding U.S. monetary policy developments after 1960 (i.e., the period beyond that covered by his and Anna Schwartz's Monetary History of the United States). The author evaluates these interpretations and predictions in light of subsequent events. [ABSTRACT FROM AUTHOR]

The article relates the author's view on the study by J. Hamilton which assesses the affects of monetary policy using daily federal funds futures contracts in the U.S. The author asserts that the signal-extraction approach to determine the market's reaction of the study allows the market's reaction to be estimated using an entire sample and allows the measurement of financial markets' response to evolving expectations of future federal actions.

The article presents the author's view on the study by A. Orphanides and V. Wieland which examines the usefulness of Taylor rule to the Federal Open Market Committee monetary policy projections in the U.S. He remarks that the study indicates that in the presence of different types of uncertainty, simple rules for monetary policy are able to deliver good economic outcomes. He argues that it points to some unresolved issues that pertains to the ability to describe actual policy as rule based.

The article presents the author's comment on the study by Marek Jarociński and Frank R. Smets on house prices and monetary policy in the U.S. The author remarks that the study briefly show that the recent U.S. housing boom is explained by a combination of increases in housing demand and loose monetary policy. He notes that the study also shows that housing demand shocks have a very limited impact on the overall volatility of real growth and inflation.

The article presents the author's view on the study by A. Orphanides and V. Wieland which examines whether a Taylor rule can be fitted to the Federal Open Market Committee monetary policy projections in the U.S. He contends that the finding that a Taylor rule gives a unique stable solution under rational expectations and resolves various puzzles regarding the data on outcomes is an interesting finding. However, he argues that the Taylor rule is an incomplete description of monetary policy.

The article presents the author's comments on the study by J. Hamilton which assesses the effects of monetary policy using daily federal funds futures contracts daily movements in the U.S. The author asserts that the study contains innovative econometric work that offers understanding on the links between federal funds futures prices, the policy rate and other market rates. However, he contends that the results have no apparent implications to revise views of how monetary policy works.

This article was originally published in the Board of Governors of the Federal Reserve System Open Market Policies and Operating Procedures—Staff Studies, July 1971. It is reprinted here as an addendum to these conference proceedings. [ABSTRACT FROM AUTHOR]

By providing guidance about future economic developments, central banks can affect private sector expectations and decisions. This can improve welfare by reducing private sector forecast errors, but it can also magnify the impact of noise in central bank forecasts. I employ a model of heterogeneous information to compare outcomes under opaque and transparent monetary policies. While better central bank information is always welfare improving, more central bank information may not be. [ABSTRACT FROM AUTHOR]

The article presents the author's comment on the study by Marek Jarociński and Frank R. Smets on house prices and monetary policy in the U.S. The author contends that the study highlights important questions about the linkages of housing and mortgage markets and their implications for monetary policy. He remarks that the analysis also provides empirical evidence on the consideration of the potential role of house prices in a monetary conditions index.

It is widely acknowledged that the Fed can control the average inflation rate over a period of time reasonably well. Because of this and the Federal Open Market Committee's (FOMC's) long-standing commitment to price stability, the author argues that the FOMC has an implicit long-run inflation objective (LIO)--lower and upper bounds to the long-run inflation rate. He shows that the statements made by the FOMC in 2003 clarified the lower bound of its LIO and that the average of long-run inflation expectations responded by rising about 80 basis points. Moreover, consistent with reducing the market's uncertainty about the FOMC's LIO, long-run inflation expectations became more stable. The FOMC has recently been more specific about the upper bound of its LIO as well. The FOMC could eliminate the remaining uncertainty by establishing an explicit, numerical inflation objective. [ABSTRACT FROM AUTHOR]

The article explores the nature of the rule followed by the U.S. Federal Reserve Board in making its monetary policy. It argues that monetary economists have not yet developed a formal rule that is likely to have better operating properties than the Federal Reserve's practice. It discusses the predictability of the Federal Reserve's policy decisions. It analyzes the goal of low and stable inflation as used to sustain economic growth.

Discusses the implications of central bank transparency for the formation of U.S. monetary policy. Fundamentals of macroeconomics equilibrium; Cases of miscommunication; Examination of the economic purpose of disclosure.