Does Fed policy reveal a ternary mandate?

Joe Peek, Eric Rosengren () and Geoffrey Tootell

No 16-11, Working Papers from Federal Reserve Bank of Boston

Abstract: This paper examines the role of financial instability in setting monetary policy. The paper begins with a model that examines the interaction of monetary and regulatory policy. It then empirically tests whether financial instability has affected monetary policy. One important innovation is to construct a measure of financial instability directly related to the FOMC financial instability concerns expressed in FOMC meeting transcripts. We find that, even after controlling for forecasts of inflation and unemployment, the word counts of terms related to financial instability do correlate with monetary policy decisions. Thus, the FOMC not only ?talks the talk? about financial stability, but it ?walks the walk.?

JEL-codes: E44 E52 E58 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2016-09-01
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (23)

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