The Fed's Monetary Policy RulePast, Present and Future

Resumen

This paper has a twofold purpose. In the context of a structural macroeconomic model, it derives estimates of the Federal Reserve's preference parameters in its pre and post - 1980 loss function. We show that there was an economically, but not statistically, significant change in the preferences of the U.S. Fed towards inflation stabilization. We also derive, within a strict inflation targeting regime, the optimal changes in the Fed's reaction to expected inflation as a function of the forward looking parameters in the supply and demand equations.