On the Information Content of Asymmetric FOMC Policy Statements: Evidence from a Taylor-Rule Perspective

12 Pages Posted: 5 Jun 2006

See all articles by Michael R. Pakko

Michael R. Pakko

Arkansas Economic Development Institute

Abstract

For over two decades, the FOMC has included in its policy decisions a statement of bias toward subsequent tightening or easing of policy. This article examines the predictive content of these statements in a Taylor-rule setting, finding that they convey useful information for forecasting changes in the federal funds rate target, even after controlling for policy responses to inflation and the output gap. Moreover, the evidence suggests that this asymmetry can be represented in terms of shifts to the parameters of the Taylor-rule equation, indicating a greater or lesser degree of responsiveness to information about inflation and output. (JEL E52, E58)

Suggested Citation

Pakko, Michael R., On the Information Content of Asymmetric FOMC Policy Statements: Evidence from a Taylor-Rule Perspective. Economic Inquiry, Vol. 43, Issue 3, pp. 558-569, 2005, Available at SSRN: https://ssrn.com/abstract=906252

Michael R. Pakko (Contact Author)

Arkansas Economic Development Institute ( email )

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