Can we Identify the Fed' s Preferences?

Jean-Bernard Chatelain (1) , Kirsten Ralf (2)

1 PSE - Paris-Jourdan Sciences Economiques
2 Ecole Supérieure du Commerce Extérieur - ESCE

A pre-test of Ramsey optimal policy versus time-consistent policy rejects time-consistent policy and (optimal) simple rule for the U.S. Fed during 1960 to 2006, assuming the reference new-Keynesian Phillips curve transmission mechanism with auto-correlated cost-push shock. The number of reduced form parameters is larger with Ramsey optimal policy than with time-consistent policy although the number of structural parameters, including central bank preferences, is the same. The new-Keynesian Phillips curve model is under-identi…ed with Ramsey optimal policy (one identifying equation missing) and hence under-identi…ed for time-consistent policy (three identifying equations missing). Estimating a structural VAR for Ramsey optimal policy during Volcker-Greenspan period, the new-Keynesian Phillips curve slope parameter and the Fed's preferences (weight of the volatility of the output gap) are not statistically di¤erent from zero at the 5% level. JEL classi…cation numbers: C61, C62, E43, E44, E47, E52, E58.

Mots clés: Ramsey optimal policy; Time-consistent policy; Identi…cation; Central bank preferences; New-Keynesian Phillips curve

Domaines: Statistiques [math.ST]

Jean-Bernard Chatelain, Kirsten Ralf. Can we Identify the Fed' s Preferences?. 2017. ⟨hal-01465934v1⟩