Interest Rates, Inflation, and Federal Reserve Policy since 1980

Peter Ireland

Journal of Money, Credit and Banking, 2000, vol. 32, issue 3, 417-34

Abstract: This paper characterizes Federal Reserve policy since 1980 as one that actively manages short-term nominal interest rates in order to control inflation and evaluates this policy using a dynamic, stochastic, sticky-price model of the United States economy. The results show that the Fed's policy insulates aggregate output from the effects of exogenous demand-side disturbances and, by calling for a modest but persistent reduction in short-term interest rates following a positive technology shock, helps the economy to respond to supply-side disturbances as it would in the absence of nominal rigidities.

Date: 2000
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Working Paper: Interest Rates, Inflation, and Federal Reserve Policy Since 1980 (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:32:y:2000:i:3:p:417-34

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