Does the Fed Adhere to its Mandate? Estimating the Federal Reserve's Objective Function

Makram El-Shagi

No 2024/3, CFDS Discussion Paper Series from Center for Financial Development and Stability at Henan University, Kaifeng, Henan, China

Abstract: In this paper, we reinterpret a novel approach that was designed to assess policy optimality given a known objective function. In the spirit of Uhlig’s “quantitative interpretation†, we reverse engineer the results to allow the estimation of the objective function, assuming that the policymaker aims for optimality. We show, that the Fed – despite its dual mandate – places far greater weight on business cycle stabilization than on combating inflation.

Keywords: monetary policy; objective function (search for similar items in EconPapers)
JEL-codes: E52 (search for similar items in EconPapers)
Date: 2024-03
New Economics Papers: this item is included in nep-cba
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