Economics, Econometrics and Finance
4 years ago

Federal Reserve under Greenspan era focused on core inflation and smoothed interest rates.

Economic quarterly - Federal Reserve Bank of Richmond
A Taylor Rule and the Greenspan Era
Yash P. Mehra, Brian D. Minton

Paper Summary

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The Federal Reserve under Chairman Alan Greenspan used a monetary policy rule called the Taylor rule to set interest rates. Initially, it was thought that they focused on past inflation and didn't smooth interest rates. However, recent research shows they actually looked ahead, focused on core inflation, and smoothed interest rates. This new study uses real-time economic data to confirm these findings.