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dc.contributor.authorTootell, Geoffen_US
dc.contributor.authorFuhrer, Jeffen_US
dc.description.abstractThe appropriate role for equity prices in monetary policy deliberations has been hotly debated for some time. Recent work suggests that equity prices have affected monetary policy decisions above and beyond their indirect effect on the traditional goal variables of the FOMC. However, the correlation between stock price movements and these other goal variables has made the identification of the equity price effect problematic. Previous studies have used a forecast that embodies a different information set from the one used by the FOMC, which could bias the estimated coefficient on equity prices. The authors show that, in fact, the methods used in the earlier literature fail to adequately disentangle the observational equivalence problem. The authors then show that after controlling for the information that actually enters the FOMCfs decision]making process, equity prices have had no independent effect on monetary policy.en_US
dc.publisherFederal Reserve Bank of Boston Boston, MAen_US
dc.relation.ispartofseriesPublic policy discussion papers / Federal Reserve Bank of Boston 04,2en_US
dc.subject.keywordmonetary policyen_US
dc.subject.keywordpolicy rulesen_US
dc.subject.keywordasset pricesen_US
dc.subject.stwRegelgebundene Politiken_US
dc.titleEyes on the Prize: How Did the Fed Respond to the Stock Market?en_US
dc.typeWorking Paperen_US
Appears in Collections:Public Policy Discussion Papers, Federal Reserve Bank of Boston

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