Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82356
Authors: 
Christensen, Anders Møller
Nielsen, Heino Bohn
Year of Publication: 
2003
Series/Report no.: 
Danmarks Nationalbank Working Papers 11
Abstract: 
Based on the equilibrium correction structure of a cointegrated vector autoregression it is rejected that US monetary policy 1988-2002 can be described by a traditional Taylor (1993) rule. Instead we find a stable long-term relationship between the Federal funds rate, the unemployment rate, and the long-term interest rate, with deviations from the long-term relation being corrected primarily via changes in Federal funds rate. This is taken as an indication that the FOMC sets interest rates with a view to activity and to expected inflation and other conditions available in financial markets.
Subjects: 
Taylor rule
Bond rate
Cointegration
Equilibrium Correction
JEL: 
C32
E52
Document Type: 
Working Paper

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