Explaining and Forecasting the US Federal Funds Rate: A Monetary Policy Model for the US

Cover......Page 1
Contents......Page 8
List of Figures......Page 10
List of Tables......Page 12
Acronyms......Page 14
Introduction......Page 16
Introduction......Page 20
The Taylor rule......Page 23
Explaining deviations in the Taylor rule from the actual FFR......Page 29
Variations on the Taylor rule using other data......Page 33
Discretion versus rules based monetary policy......Page 35
Data used in monetary policy models......Page 37
Introduction......Page 42
The history of Fed policy since 1970......Page 43
Fed targets and policy instruments......Page 56
Applications of the MPM......Page 62
The MPM equation......Page 64
Explaining deviations in the MPM from the actual FFR......Page 70
Using the MPM......Page 75
Modifying the MPM during \'crisis\' periods......Page 78
Using the modified MPM......Page 80
Assessing the accuracy of the MPM in describing the FFR......Page 82
Introduction......Page 84
Using CBO economic projections with the MPM to estimate the future FFR......Page 85
Making one year ahead FFR forecasts......Page 86
Making two year ahead average FFR forecasts......Page 87
Making three to five year ahead forecasts......Page 88
Introduction......Page 90
One year ahead futures prices......Page 91
Two year ahead futures prices......Page 92
Two year ahead average futures prices......Page 93
Comparing the two year ahead average forecasting errors of the MPM and eurodollar futures strips......Page 96
Appendices......Page 98
Appendix 1 Historic economic data (1980–2002)......Page 100
Appendix 2 Eurodollar futures: historical data (1987–2002)......Page 108
Appendix 3 The Federal Funds Rate (1980–2002)......Page 118
Appendix 4 A comparison of different US inflation measures (1970–2002)......Page 142
Appendix 5 The MPM and FFR (1980–2002)......Page 144
Bibliography......Page 150
General Notes......Page 154
F......Page 158
U......Page 159
Y......Page 160