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Modest policy interventions

Author

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  • Eric M. Leeper
  • Tao Zha
Abstract
This paper brings together identification and forecasting in a positive econometric analysis of policy. We contend that a broad range of important policy questions is consistent with the existing policy process and is not subject to Lucas's critique. We analyze the economics of \"business as usual\" and show that modest policy interventions, whose effects can be projected even if expectations are modeled as depending solely on past policy, can address routine questions like those raised at regular policy meetings. And modest interventions matter: they can shift the projected paths and probability distributions of macro variables in economically meaningful ways.

Suggested Citation

  • Eric M. Leeper & Tao Zha, 1999. "Modest policy interventions," FRB Atlanta Working Paper 99-22, Federal Reserve Bank of Atlanta.
    • Handle: RePEc:fip:fedawp:99-22
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    References listed on IDEAS

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    More about this item

    Keywords

    Monetary policy; Forecasting; Vector autoregression; Econometrics;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications

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