A Defense Of The Fomc

Martin Ellison, Thomas Sargent

    Research output: Contribution to journalArticle

    Abstract

    We defend the forecasting performance of the Federal Reserve Open Market Committee (FOMC) against the criticism of Christina and David Romer (2008, American Economic Review 98, 230-235) by assuming that the FOMC's forecasts depict a worst-case scenario that it uses to design decisions that are robust to misspecification of the staff's model. We use a simple macro model and a plausible loss function to illustrate how such an interpretation of the FOMC's forecasts can explain the findings of Romer and Romer, including the pattern of differences between FOMC forecasts and forecasts published by the staff of the Federal Reserve System in the Greenbook.

    Original languageEnglish (US)
    Pages (from-to)1047-1065
    Number of pages19
    JournalInternational Economic Review
    Volume53
    Issue number4
    DOIs
    StatePublished - Nov 2012

    Fingerprint

    Federal Reserve
    Staff
    Criticism
    Forecasting performance
    Macro model
    Scenarios
    Economics
    Loss function
    Misspecification

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    A Defense Of The Fomc. / Ellison, Martin; Sargent, Thomas.

    In: International Economic Review, Vol. 53, No. 4, 11.2012, p. 1047-1065.

    Research output: Contribution to journalArticle

    Ellison, M & Sargent, T 2012, 'A Defense Of The Fomc', International Economic Review, vol. 53, no. 4, pp. 1047-1065. https://doi.org/10.1111/j.1468-2354.2012.00711.x
    Ellison, Martin ; Sargent, Thomas. / A Defense Of The Fomc. In: International Economic Review. 2012 ; Vol. 53, No. 4. pp. 1047-1065.
    @article{c7db0074465c46e89eff5854b534cf49,
    title = "A Defense Of The Fomc",
    abstract = "We defend the forecasting performance of the Federal Reserve Open Market Committee (FOMC) against the criticism of Christina and David Romer (2008, American Economic Review 98, 230-235) by assuming that the FOMC's forecasts depict a worst-case scenario that it uses to design decisions that are robust to misspecification of the staff's model. We use a simple macro model and a plausible loss function to illustrate how such an interpretation of the FOMC's forecasts can explain the findings of Romer and Romer, including the pattern of differences between FOMC forecasts and forecasts published by the staff of the Federal Reserve System in the Greenbook.",
    author = "Martin Ellison and Thomas Sargent",
    year = "2012",
    month = "11",
    doi = "10.1111/j.1468-2354.2012.00711.x",
    language = "English (US)",
    volume = "53",
    pages = "1047--1065",
    journal = "International Economic Review",
    issn = "0020-6598",
    publisher = "Wiley-Blackwell",
    number = "4",

    }

    TY - JOUR

    T1 - A Defense Of The Fomc

    AU - Ellison, Martin

    AU - Sargent, Thomas

    PY - 2012/11

    Y1 - 2012/11

    N2 - We defend the forecasting performance of the Federal Reserve Open Market Committee (FOMC) against the criticism of Christina and David Romer (2008, American Economic Review 98, 230-235) by assuming that the FOMC's forecasts depict a worst-case scenario that it uses to design decisions that are robust to misspecification of the staff's model. We use a simple macro model and a plausible loss function to illustrate how such an interpretation of the FOMC's forecasts can explain the findings of Romer and Romer, including the pattern of differences between FOMC forecasts and forecasts published by the staff of the Federal Reserve System in the Greenbook.

    AB - We defend the forecasting performance of the Federal Reserve Open Market Committee (FOMC) against the criticism of Christina and David Romer (2008, American Economic Review 98, 230-235) by assuming that the FOMC's forecasts depict a worst-case scenario that it uses to design decisions that are robust to misspecification of the staff's model. We use a simple macro model and a plausible loss function to illustrate how such an interpretation of the FOMC's forecasts can explain the findings of Romer and Romer, including the pattern of differences between FOMC forecasts and forecasts published by the staff of the Federal Reserve System in the Greenbook.

    UR - http://www.scopus.com/inward/record.url?scp=84867340978&partnerID=8YFLogxK

    UR - http://www.scopus.com/inward/citedby.url?scp=84867340978&partnerID=8YFLogxK

    U2 - 10.1111/j.1468-2354.2012.00711.x

    DO - 10.1111/j.1468-2354.2012.00711.x

    M3 - Article

    VL - 53

    SP - 1047

    EP - 1065

    JO - International Economic Review

    JF - International Economic Review

    SN - 0020-6598

    IS - 4

    ER -