The Evolution of U.S. Monetary Policy: 2000 - 2007

51 Pages Posted: 3 Oct 2016 Last revised: 5 Jul 2023

See all articles by Michael T. Belongia

Michael T. Belongia

University of Mississippi - Department of Economics

Peter N. Ireland

Boston College - Department of Economics

Date Written: September 2016

Abstract

A vector autoregression with time-varying parameters is used to characterize changes in Federal Reserve policy that occurred from 2000 through 2007 and describe how they affected the performance of the U.S. economy. Declining coefficients in the model’s estimated policy rule point to a shift in the Fed’s emphasis away from stabilizing inflation over this period. More importantly, however, the Fed held the federal funds rate persistently below the values prescribed by this rule. Under this more discretionary policy, inflation overshot its target and the funds rate followed a path reminiscent of the "stop-go" pattern that characterized Fed behavior prior to 1979.

Suggested Citation

Belongia, Michael T. and Ireland, Peter N., The Evolution of U.S. Monetary Policy: 2000 - 2007 (September 2016). NBER Working Paper No. w22693, Available at SSRN: https://ssrn.com/abstract=2846908

Michael T. Belongia (Contact Author)

University of Mississippi - Department of Economics ( email )

371 Holman Hall
University, MS 38677
United States

Peter N. Ireland

Boston College - Department of Economics ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States
617-552-3687 (Phone)
617-552-2308 (Fax)

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