Arbeitspapier

Searching for the FED's reaction function

There is still some doubt about those economic variables that really matter for the FED's decisions. In comparison to other estimations, this study uses the approach of Bayesian Model Averaging (BMA). The estimations show that over the long run inflation, unemployment rates, and long-term interest rates are the crucial variables in explaining the Federal Funds Rate. In the other two estimation samples, also the federal deficit and M2 were of relevance. In addition, we present the best models in more detail. Finally, a model average is constructed via BMA. The model average substantially outperforms a simple Taylor rule.

Language
Englisch

Bibliographic citation
Series: BGPE Discussion Paper ; No. 154

Classification
Wirtschaft
Interest Rates: Determination, Term Structure, and Effects
Monetary Policy
Central Banks and Their Policies
Subject
FED
Monetary Policy Reaction Functions
Model Uncertainty
Bayesian Model Averaging

Event
Geistige Schöpfung
(who)
Woelfel, Katrin
Weber, Christoph S.
Event
Veröffentlichung
(who)
Friedrich-Alexander-Universität Erlangen-Nürnberg, Bavarian Graduate Program in Economics (BGPE)
(where)
Nürnberg
(when)
2014

Handle
Last update
10.03.2025, 11:43 AM CET

Data provider

This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.

Object type

  • Arbeitspapier

Associated

  • Woelfel, Katrin
  • Weber, Christoph S.
  • Friedrich-Alexander-Universität Erlangen-Nürnberg, Bavarian Graduate Program in Economics (BGPE)

Time of origin

  • 2014

Other Objects (12)