Changes in the Federal Reserve’s Inflation Target: Causes and Consequences

Peter Ireland

No 607, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: This paper estimates a New Keynesian model to draw inferences about the behavior of the Federal Reserve’s unobserved inflation target. The results indicate that the target rose from 1 1/4 percent in 1959 to over 8 percent in the mid-to-late 1970s before falling back below 2 1/2 percent in 2004. The results also provide some support for the hypothesis that over the entire postwar period, Federal Reserve policy has systematically translated short-run price pressures set off by supply-side shocks into more persistent movements in inflation itself, although considerable uncertainty remains about the true source of shifts in the inflation target.

Keywords: inflation target; new Keynesian model; supply shocks; inflation (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 (search for similar items in EconPapers)
Date: 2005-01-14
New Economics Papers: this item is included in nep-cba, nep-his, nep-mac and nep-mon
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Changes in the Federal Reserve's Inflation Target: Causes and Consequences (2007)
Journal Article: Changes in the Federal Reserve's Inflation Target: Causes and Consequences (2007)
Working Paper: Changes in the Federal Reserve's Inflation Target: Causes and Consequences (2006)
Working Paper: Changes in the Federal Reserve's inflation target: causes and consequences (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:boc:bocoec:607

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