{
  "title": "The Greenbook and U.S. Monetary Policy",
  "publication": "IMF Working Papers, November 1, 2004",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/the-greenbook-and-u-s-17758",
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  "summary": "Although very attractive both theoretically and empirically, Taylor rules imply mechanical responses by the policy variable (interest rate) to fundamental ones (inflation and output gap).",
  "sections": [
    {
      "heading": "Study objective and data",
      "content": "- Author: Robert Tchaidze\n- Publication date: November 1, 2004\n- Objective: Test for empirical evidence that U.S. monetary policy is forward looking and incorporates expected future developments rather than following a mechanical Taylor rule.\n- Key data input: \"Greenbook\" forecast series calculated by the Federal Reserve staff, used to evaluate expected inflation shocks."
    },
    {
      "heading": "Method and approach",
      "content": "- Comparison of standard Taylor rules (mechanical responses of the policy interest rate to inflation and output gap) with specifications augmented by expected inflation shocks derived from Greenbook forecasts.\n- Consideration of the possibility that policymakers have in mind a time-varying inflation target, implying potential misspecification of a simple Taylor rule."
    },
    {
      "heading": "Key findings",
      "content": "- Expected inflation shocks (from Greenbook forecasts) are significant in the estimated Taylor rule, confirming that policymaking is forward looking.\n- A simple Taylor rule may be a misspecification if policymakers have a time-varying inflation target."
    },
    {
      "heading": "Policy implications and interpretation",
      "content": "- Monetary policy appears to respond to expected future developments (as captured by Greenbook forecasts), not only contemporaneous inflation and output gaps.\n- Models of policy behavior should account for forward-looking information and allow for a potentially time-varying inflation target to avoid misspecification."
    },
    {
      "heading": "Subjects and keywords",
      "content": "- Subject: Financial services, Inflation, Inflation targeting, Monetary policy, Output gap, Prices, Production, Real interest rates\n- Keywords: Inflation, inflation response, inflation shock, Inflation targeting, lags-and-forecasts output gap estimate, Middle East, monetary policy, Output gap, output gap response, output gap shock, Real interest rates, real-time data, Taylor rule, WP\n\n---\n\n Content in this bundle\n\n- The Greenbook and U.S. Monetary Policy\n  - The Greenbook and U.S. Monetary Policy (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - The Greenbook and U.S. Monetary Policy (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/the-greenbook-and-u-s-17758"
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    "Authors: Robert Tchaidze",
    "Published: November 1, 2004",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451874976.001",
    "Author: Robert Tchaidze",
    "Publication date: November 1, 2004",
    "Objective: Test for empirical evidence that U.S. monetary policy is forward looking and incorporates expected future developments rather than following a mechanical Taylor rule.",
    "Key data input: \"Greenbook\" forecast series calculated by the Federal Reserve staff, used to evaluate expected inflation shocks.",
    "Comparison of standard Taylor rules (mechanical responses of the policy interest rate to inflation and output gap) with specifications augmented by expected inflation shocks derived from Greenbook forecasts.",
    "Consideration of the possibility that policymakers have in mind a time-varying inflation target, implying potential misspecification of a simple Taylor rule.",
    "Expected inflation shocks (from Greenbook forecasts) are significant in the estimated Taylor rule, confirming that policymaking is forward looking.",
    "A simple Taylor rule may be a misspecification if policymakers have a time-varying inflation target.",
    "Monetary policy appears to respond to expected future developments (as captured by Greenbook forecasts), not only contemporaneous inflation and output gaps.",
    "Models of policy behavior should account for forward-looking information and allow for a potentially time-varying inflation target to avoid misspecification.",
    "Subject: Financial services, Inflation, Inflation targeting, Monetary policy, Output gap, Prices, Production, Real interest rates",
    "Keywords: Inflation, inflation response, inflation shock, Inflation targeting, lags-and-forecasts output gap estimate, Middle East, monetary policy, Output gap, output gap response, output gap shock, Real interest rates, real-time data, Taylor rule, WP",
    "**The Greenbook and U.S. Monetary Policy**"
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