The role of policymakers in business cycle fluctuations / Jim Granato, M.C. Sunny Wong.

Format:

Book

Author/Creator:

Granato, Jim, 1960-

Contributor:

Wong, M. C. Sunny, 1976-

Language:

English

Subjects (All):

Economic policy.

Business cycles.

Inflation (Finance).

Physical Description:

xxvi, 290 pages : illustrations ; 23 cm

Place of Publication:

New York, NY : Cambridge University Press, 2006.

Contents:

I The Interaction of Policy and Outcomes

1 Coordinating Price Information 3

1.1 Features of the Book 11

2 Outcomes and Policy: An Illustration 27

2.1 Inflation-Output Costabilization: The Data 29

2.1.1 Inflation Volatility 31

2.1.2 Output Volatility 34

2.1.3 Data on Inflation Uncertainty 38

2.2 Inflation-Stabilization Policy and IOCS 48

2.2.1 Policymakers and Information Coordination 51

2.3 Policy Indicators 54

2.3.1 The Federal Funds Rate Ratio 56

2.3.2 The Taylor Rule 62

2.3.3 Taylor Principle Deviations 67

2.4 The Interest Rate Volatility and IOCS Trade-Off 73

3 Policy Evolution: 1960 to 2000 80

3.1 The 1960s: Deemphasizing Inflation Stability 83

3.2 The 1970s: Inflation Instability and Stagflation 92

3.3 The 1980s: Inflation Stability Reemphasized 100

3.4 The 1990s: Continuity and Preemption 105

II The Role of Policymakers

4 The Theoretical Model 115

4.1 Price Level Adjustment 116

4.2 Aggregate Demand 119

4.3 The Policy Rule 120

4.3.1 Implementation 123

4.3.2 The Taylor Rule: Structure and Development 124

5 Policy and Aggregate Variability 136

5.1 Feasibility 137

5.1.1 Equilibrium Inflation and Alternative Target Mixes 138

5.1.2 Equilibrium Output and Alternative Target Mixes 140

5.2 Aggregate Variability 141

5.3 The Policy Rule and Inflation Variability 143

5.3.1 The Crossover Effect of Output Targeting (CEOT) 144

5.4 The Policy Rule and Output Variability 146

5.4.1 The Crossover Effect of Inflation Targeting (CEIT) 146

5.6.1 Solving the System 149

6 The Optimal Policymaker Role 153

6.1 Optimal Policy Target Emphasis 156

6.2 Regime and Preference Shifts and IOCS 161

6.2.1 Feasible Policy Weight Ranges 164

6.3 IOCS in the Presence of Exogenous Shocks 168

6.5.1 The Interest Rate Volatility and IOCS Trade-Off: A Test 170

III Coordination Dynamics

7 Coordinating Inflation Forecasts 177

7.1 Empirical Implications of the Theoretical Model 181

7.2 The Relative-Real-Wage Contract Specification 184

7.2.1 The IS Specification 186

7.2.2 The Taylor Rule 187

7.3 Stability Analysis 188

7.3.1 The Equilibrium Inflation Rate 188

7.3.2 Expectational Stability 191

7.4 Policy and Inflation Dynamics 194

7.4.1 Inflation Persistence 194

7.4.2 Inflation Volatility 195

7.5.1 Estimates of Inflation Persistence 199

7.5.2 The Appropriate Structural Break and Policy Effectiveness 201

7.5.3 Estimates of Inflation Persistence and Volatility 206

7.7.1 A Brief Summary of the Adaptive Learning Approach 213

8 Inflation-Stabilizing Policy: Robustness 218

8.1 The Model 219

8.2 Determinacy 222

8.3 Adaptive Learning by Agents 225

8.4 Model Illustrations 229

8.4.1 Learning Dynamics 229

8.4.2 Inflation Persistence 231

9 Conclusion and Implications 233

9.1 Implications for Policymakers 240

9.1.1 Institutional Reform and Information Coordination 241

9.2 Implications for Future Research 245

9.2.1 The Need for Comparative Analysis 245

9.2.2 The Effect of Political and Social Forces on Policy 246

9.2.3 Long-Term Consequences 248.

Notes:

Includes bibliographical references (pages 251-275) and index.

ISBN:

0521860164

OCLC:

63116431

Publisher Number:

9780521860161