The Fed and the New Economy

Laurence Ball and Robert R. Tchaidze
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Robert R. Tchaidze: JOhns Hopkins University

No 102002, Working Papers from Hong Kong Institute for Monetary Research

Abstract: This paper seeks to understand the behavior of Greenspan's Federal Reserve in the late 1990s. Some authors suggest that the Fed followed a simple "Taylor rule", while others argue that it deviated from such a rule because it recognized that the "New Economy" permitted an easing of policy. We find that a Taylor rule based on inflation and unemployment does break down in the late 1990s. However, the Fed's behavior appears stable once one accounts for the falling NAIRU of the period. A rule based on inflation and the deviation of unemployment from the NAIRU captures the Fed's behavior through the entire period from 1987 to 2000.

Pages: 15 pages
Date: 2002-05
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Citations: View citations in EconPapers (38)

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Related works:
Journal Article: The Fed and the New Economy (2002)
Working Paper: The Fed and the New Economy (2002)
Working Paper: The Fed and the New Economy (2001)
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