Inflation zone targeting and the Federal Reserve

Minoru Tachibana

Journal of the Japanese and International Economies, 2008, vol. 22, issue 1, 68-84

Abstract: The purpose of this paper is to examine whether the Federal Reserve (the Fed) implicitly implemented an inflation zone targeting policy. To this end, I estimate the piecewise linear Taylor rule, in which the magnitude of the inflation coefficient depends on whether inflation lies within or outside a target zone. The estimation results show that the Fed conducted an inflation zone targeting policy during the 1987-2004 period. In addition, it is found that a symmetric (not asymmetric) specification of the piecewise linear rule is adequate to describe the inflation zone targeting behavior of the Fed. J. Japanese Int. Economies 22 (1) (2008) 68-84.

Date: 2008
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