Expectations and the effects of monetary policy

Laurence Ball and Dean Croushore

No 98-13, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: This paper examines the predictive power of shifts in monetary policy, as measured by changes in the real federal funds rate, for output, inflation, and survey expectations of these variables. The authors find that policy shifts have larger effects on actual output than on expected output, suggesting that agents underestimate the effects of policy on aggregate demand. Their results help explain the real effects of monetary policy, and they provide negative evidence on the rationality of expectations.

Keywords: Monetary policy; Rational expectations (Economic theory) (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Expectations and the Effects of Monetary Policy (2003)
Working Paper: Expectations and the effects of monetary policy (2001)
Working Paper: Expectations and the effects of monetary policy (1995)
Working Paper: Expectations and the Effects of Monetary Policy (1995)
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