Velocity Futures Markets: Does the Fed Need a Structural Model?
Previous proposals suggesting monetary policy makers target private-sector forecasts have been shown to be problematic. As policy becomes more effective, private-sector forecasts become less informative. Under perfect stabilization private-sector forecasts provide no useful guidance to monetary poli...
| Published in: | Economic Inquiry Vol. 44; no. 4; pp. 716 - 729 |
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| Main Authors: | , |
| Format: | Article |
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Wiley-Blackwell
October 2006
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| Online Access: | View this record in EBSCOhost |
| fields | @attributes: recordID: 1 pdfLink: plink: https://search.ebscohost.com/login.aspx?direct=true&db=ssf&AN=510645047&site=ehost-live header: @attributes: shortDbName: ssf uiTerm: 510645047 longDbName: Social Sciences Full Text (H.W. Wilson) uiTag: AN controlInfo: bkinfo: jinfo: jid: 00952583 EIQ jtl: Economic Inquiry issn: 00952583 maglogo: N pubinfo: dt: October 2006 vid: 44 iid: 4 pid: 480 pub: Wiley-Blackwell artinfo: ui: 510645047 10.1093/ei/cbj044 ppf: 716 ppct: 13 formats: fmt: – @attributes: type: T – @attributes: type: P size: 1.2MB tig: atl: Velocity Futures Markets: Does the Fed Need a Structural Model? aug: au: Jackson, Aaron L. Sumner, Scott su: Mathematical models of monetary policy Mathematical models Circular velocity of money Central banking industry United States sug: subj: United States Mathematical models of monetary policy Mathematical models Circular velocity of money Central banking industry ab: Previous proposals suggesting monetary policy makers target private-sector forecasts have been shown to be problematic. As policy becomes more effective, private-sector forecasts become less informative. Under perfect stabilization private-sector forecasts provide no useful guidance to monetary policy makers about economic shocks. We illustrate a way around this circularity problem by creating a policy futures market linked to the ratio of the (realization of the) policy goal for next period and the current instrument setting. The implication is that extensive information gathering is unnecessary, weakening the argument that central banks need a structural model to conduct policy. (JEL E52, E44, E42) Reprinted by permission of the publisher. pubtype: Academic Journal doctype: Article src: R language: English refInfo: copyright: @attributes: flag: N holdings: @attributes: islocal: N |
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