A random coefficients Kalman filter model of the response of commodity prices to weekly M1 announcements indicates a gradual evolution in the credibility of the Federal Reserve as an inflation fighter. The October 1979 announcement of a change in monetary policy aimed at reducing inflation did not result in an immediate increase in credibility, and the October 1982 announcement of a policy reversal did not diminish credibility. Credibility does vary with the underlying rate of inflation, which shows that markets pay attention to policy results not simply policy announcements.

Scott W. Barnhart, Robert McNown, Myles S. Wallace, Non-Informative Tests of the Unbiased Forward Exchange Rate, The Journal of Financial and Quantitative Analysis, Vol. 34, No. 2 (Jun., 1999), pp. 265-291

Scott W. Barnhart, Andrew C. Szakmary, Testing the Unbiased Forward Rate Hypothesis: Evidence on Unit Roots, Co- Integration, and Stochastic Coefficients, The Journal of Financial and Quantitative Analysis, Vol. 26, No. 2 (Jun., 1991), pp. 245-267