Federal Reserve Private Information and the Behavior of Interest Rates

Christina Romer and David Romer

No 5692, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Many authors argue that asymmetric information between the Federal Reserve and the public is important to the conduct and the effects of monetary policy. This paper tests for the existence of such asymmetric information by examining Federal Reserve and commercial inflation forecasts. We demonstrate that the Federal Reserve has considerable information about inflation beyond what is known to commercial forecasters. We also provide evidence that monetary policy actions provide signals of the Federal Reserve's private information and that commercial forecasters modify their forecasts in response to those signals. These findings may explain why long-term interest rates typically rise in response to shifts to tighter monetary policy.

JEL-codes: D82 E52 (search for similar items in EconPapers)
Date: 1996-07
Note: EFG ME
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Citations: View citations in EconPapers (24)

Published as Romer, Christina D. and David H. Romer. "Federal Reserve Information And The Behavior Of Interest Rates," American Economic Review, 2000, v90(3,Jun), 429-457.

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