Federal Reserve Policy viewed through a Money Supply Loss

Ibrahim Chowdhury () and Andreas Schabert

No 08-023/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Federal Reserve nonborrowed reserve supply systematically responded to changes in inflation and in the output gap over the period 1969-2000. While the feedback from output gap is always negative, the response of money supply to changes in inflation varies considerably across time. Nonborrowed reserves decreased with inflation in the post-1979 period and increased in the pre-1979 period. Applying a standard macro-model, the estimated reaction functions are shown to ensure equilibrium determinacy. Viewed through the money supply lens, Federal Reserve policy substantially changed over time, but has never allowed for endogenous fluctuations, which contrasts conclusions drawn from federal funds rate analyses.

Keywords: Money supply; reaction functions; nonborrowed reserves; real-time data; equilibrium determinacy (search for similar items in EconPapers)
JEL-codes: E32 E51 E52 (search for similar items in EconPapers)
Date: 2008-03-06
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Citations: View citations in EconPapers (14)

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Related works:
Journal Article: Federal reserve policy viewed through a money supply lens (2008)
Working Paper: Federal Reserve Policy viewed through a Money Supply Lens (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20080023

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