The Fed and the New Economy

Laurence Ball and Robert Tchaidze

No 8785, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E58 E65 (search for similar items in EconPapers)
Date: 2002-02
New Economics Papers: this item is included in nep-cba and nep-mon
Note: EFG ME
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Citations: View citations in EconPapers (38)

Published as Ball, Laurence and Robert R. Tchaidze. "The Fed And The New Economy," American Economic Review, 2002, v92(2,May), 108-115.

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