Boston Fed economists suggest a new model for periodically evaluating monetary policy
New research explores benefits of a more formal, open review process by U.S. central bank
New research from four Boston Fed economists – including Bank president Eric Rosengren – explores the ways the U.S. central bank frames its monetary policymaking work. The authors say the Fed’s framework – which includes goals, instruments, targets, and other facets – has been adjusted many times, but could benefit from a regular, more formal, more transparent review process.
The authors, economists Jeff Fuhrer, Giovanni Olivei, Eric Rosengren, and Geoffrey Tootell, suggest such a shift would help the Fed’s adherence to approaches that work well, and its timeliness in making changes when necessary.
The research, which is part of the Fall 2018 edition of the Brookings Institution’s Brookings Papers on Economic Activity, will be delivered September 14 at a Brookings conference in Washington D.C.
The authors examine the history of the policymaking framework to glean lessons about the process of its assessment and adjustment. Regarding the current policy framework, and whether it could be improved, the authors look to the economic performance of the Great Recession and slow recovery – and suggest while some changes have been made, more needs to be done to improve the current framework.
The authors propose a review at regular points in time -- perhaps every four years, in the second year of a Chairman’s term, and off cycle if needed – with external views presented “to ensure the status quo is regularly challenged.
Over time this could help improve policymaking and the economic outcomes delivered by the Fed on behalf of the American public, the authors say.