Inferring monetary policy objectives with a partially observed state

Gregory Givens and Michael K. Salemi

Journal of Economic Dynamics and Control, 2015, vol. 52, issue C, 190-208

Abstract: Accounting for the uncertainty in real-time perceptions of the state of the economy is believed to be critical for monetary policy analysis. We investigate this claim through the lens of a New Keynesian model with optimal discretionary policy and partial information. Structural parameters are estimated using a data set that includes real-time and ex post revised observations spanning 1965–2010. In comparison to a standard complete information model, our estimates reveal that under partial information: (i) the Federal Reserve demonstrates a significant concern for stabilizing the output gap after 1979, (ii) the model׳s fit with revised data improves, and (iii) the tension between optimal and observed policy is smaller.

Keywords: Partial information; Optimal monetary policy; Central bank preferences (search for similar items in EconPapers)
JEL-codes: C61 E37 E52 E58 E61 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (4)

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Working Paper: Inferring monetary policy objectives with a partially observed state (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:52:y:2015:i:c:p:190-208

DOI: 10.1016/j.jedc.2014.11.008

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