Federal Reserve Private Information and the Behavior of Interest Rates / Christina D. Romer, David H. Romer.

Format:

Book

Author/Creator:

Romer, Christina D.

Contributor:

National Bureau of Economic Research.

Romer, David H.

Series:

Working Paper Series (National Bureau of Economic Research) no. w5692.

NBER working paper series no. w5692

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1996.

Summary:

Many authors argue that asymmetric information between the Federal Reserve and the public is important to the conduct and the effects of monetary policy. This paper tests for the existence of such asymmetric information by examining Federal Reserve and commercial inflation forecasts. We demonstrate that the Federal Reserve has considerable information about inflation beyond what is known to commercial forecasters. We also provide evidence that monetary policy actions provide signals of the Federal Reserve's private information and that commercial forecasters modify their forecasts in response to those signals. These findings may explain why long-term interest rates typically rise in response to shifts to tighter monetary policy.

Notes:

Print version record

July 1996.