Discrete Monetary Policy Changes and Changing Inflation Targets in Estimated DSGE Models (ICPSR 1320)

Version Date: Nov 28, 2005

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Principal Investigator(s):
Anatoliy Belaygorod, Washington University; Michael J. Dueker, Federal Reserve Bank of St. Louis

https://doi.org/10.3886/ICPSR01320.v1

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Summary

Many estimated macroeconomic models assume interest rate smoothing in the monetary policy equation. In practice, monetary policymakers adjust a target level for the federal funds rate by discrete increments. One often-neglected consequence of using a quarterly average of the daily federal funds rate in empirical work is that any change in the target federal funds rate will affect the quarterly average in the current quarter and the subsequent quarter. Despite this clear source of predictable change in the quarterly average of the federal funds rate, the vast bulk of the literature that estimates policy rules ignores information concerning the timing and magnitude of discrete changes to the target federal funds rate. Consequently, policy equations that include interest rate smoothing inadvertently make the strong and unnecessary assumption that the starting point for interest rate smoothing is last quarter's average level of the federal funds rate. The authors consider, within an estimated general equilibrium model, whether policymakers put weight on the end-of-quarter target level of the federal funds rate when choosing a point at which to smooth the interest rate.

Citation

Belaygorod, Anatoliy, and Dueker, Michael J. Discrete Monetary Policy Changes and Changing Inflation Targets in Estimated DSGE Models . Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2005-11-28. https://doi.org/10.3886/ICPSR01320.v1

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Funding

Federal Reserve Bank of St. Louis

Subject Terms

Geographic Coverage

Distributor(s)

Inter-university Consortium for Political and Social Research
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Data Collection Notes

  1. The file submitted is 0511md.zip which contains both data and program files.

  2. These data are part of ICPSR's Publication-Related Archive and are distributed exactly as they arrived from the data depositor. ICPSR has not checked or processed this material. Users should consult the investigator(s) if further information is desired.

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Original Release Date

2005-11-28

Version History

2018-02-15 The citation of this study may have changed due to the new version control system that has been implemented. The previous citation was:

  • Belaygorod, Anatoliy, and Michael J. Dueker. Discrete Monetary Policy Changes and Changing Inflation Targets in Estimated DSGE Models . ICPSR01320-v1. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2005-11-28. http://doi.org/10.3886/ICPSR01320.v1

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Notes

  • These data are flagged as replication datasets and are distributed exactly as they arrived from the data depositor. ICPSR has not checked or processed this material. Users should consult the investigator(s) if further information is desired.

  • The public-use data files in this collection are available for access by the general public. Access does not require affiliation with an ICPSR member institution.