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- W2181798375 abstract "Abstract This paper presents a new methodology to evaluate the impact of forecast errors on policy. We apply this methodology to the Federal Reserve forecasts of U.S. real output growth and the inflation rate using the Taylor (1993) monetary policy rule. Our results suggest it is possible to calculate policy forecast errors using joint predictions for a number of variables. These policy forecast errors have a direct interpretation for the impact of forecasts on policy. In the case of the Federal Reserve, we find that, on average, Fed policy based on the Taylor rule was approximately a full percentage point away from the intended target because of errors in forecasting growth and inflation. 1 Gamber: Department of Economics and Business, Lafayette College, Easton, PA 18042 . 2 Sinclair, Stekler, and Reid: Department of Economics, George Washington University, Washington, DC 20052. The authors wish to thank Mike Bradley, Fred Joutz, George Monokroussos, Keith Ord, Michael Owyang, Roberto Sameniego, Peter Tinsley, and Harry Watson for helpful disc ussions. We also thank participants in the Brown Bag Seminar Series on Forecasting, the 16" @default.
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- W2181798375 date "2008-01-01" @default.
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- W2181798375 title "Institute for International Economic Policy Working Papers Series Elliott School of International Affairs" @default.
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