The Review of Economics and Statistics Vol. 71 No. 3 1989
The Evolution of Federal Reserve Credibility: 1978-1984
Abstract
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.
- DOI
- 10.2307/1926894
- Volume
- 71
- Issue
- 3
- Pages
- 385
- Sources
- crossref openalex