Authors
Athanasios Orphanides, Richard D Porter, David Reifschneider, Robert Tetlow, Frederico Finan
Publication date
2000/1/1
Journal
Journal of Economics and Business
Volume
52
Issue
1-2
Pages
117-141
Publisher
Elsevier
Description
We exploit data on historical revisions to real-time estimates of the output gap to examine the implications of measurement error for the design of monetary policy, using the Federal Reserve’s model of the U.S. economy, FRB/US. Measurement error brings about a substantial deterioration in economic performance, although the problem can be mitigated somewhat by reducing the coefficient on the output gap in policy rules. We also show that it is usually optimal to place some weight on the level of the output gap in the conduct of policy, but under extreme conditions it may be preferable to focus on output growth.
Total citations
Scholar articles
A Orphanides, RD Porter, D Reifschneider, R Tetlow… - Journal of Economics and Business, 2000
F Finan, A Orphanides, RD Porter, DL Reifschneider… - 1999