Estimating the implicit inflation target
Subtitle: an application to U.S. monetary policy
By: prepared by Daniel Leigh.
Contributors: International Monetary Fund. European Dept.
Series: IMF working paper -- WP/05/77
Publisher: International Monetary Fund, European Dept.
Published: 2005
Place of publication: Washington, D.C
Language: eng
Number of pages: 24
Subjects: Inflation (Finance) -- United States -- Econometric models.; Monetary policy -- United States -- Econometric models.
Description: This paper proposes a new method of estimating the Taylor rule with a time-varying implicit inflation target and a time-varying natural rate of interest. The inflation target and the natural rate are modeled as random walks and are estimated using maximum likelihood and the Kalman filter. I apply this method to U.S. monetary policy over the past 25 years and find considerable time variation in the implicit target, confirming hypotheses about "opportunistic disinflation" and the recent "deflation scare."
Notes: "April 2005."

Includes bibliographical references (p. 22-24).

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