Eyes on the prize: How did the fed respond to the stock market?Jeff Fuhrer and Geoff Tootell Journal of Monetary Economics, 2008, vol. 55, issue 4, pages 796-805 Abstract: Since the stock market boom of the 1990s, many have suggested the Federal Open Market Committee (FOMC) has adopted an unannounced policy goal of supporting equity values. This paper offers a new approach to disentangle the relationship between changes in equity values and monetary policy. Specifically, the paper distinguishes the FOMC's reaction to forecasts of traditional goal variables, which may depend on equity prices, from the FOMC's independent reaction to changes in equity prices. By using actual forward-looking variables examined by the FOMC before each action (the "Greenbook" forecasts), the authors find little evidence to support the proposition that the FOMC responds to stock values, except as filtered through a forecast of accepted monetary policy goal variables. Downloads: (external link) Related works: Access Statistics for this article Journal of Monetary Economics is edited by R. G. King and C. I. Plosser More articles in Journal of Monetary Economics from Elsevier |
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