Interest Rates, Inflation, and Federal Reserve Policy Since 1980

Peter Ireland

No 419, Boston College Working Papers in Economics from Boston College Department of Economics

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.

Keywords: Interest Rates; Inflation; Federal Reserve (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 (search for similar items in EconPapers)
Pages: 31 pages
Date: 1999-02-28
New Economics Papers: this item is included in nep-dge, nep-ifn and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Journal Article: Interest Rates, Inflation, and Federal Reserve Policy since 1980 (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:boc:bocoec:419

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