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Title: Testing the Opportunistic Approach to Monetary Policy
Authors: Martin, C
Milas, C
Keywords: Monetary policy
Zone of discretion
Intermediate inflation target
Publication Date: 2006
Publisher: Brunel University
Citation: Brunel Business School Economics and Finance Working Papers, 06/2006
Series/Report no.: Brunel Business School;Brunel Business School Working Papers
Abstract: The Opportunistic Approach to Monetary Policy is an influential but untested model of optimal monetary policy. We provide the first tests of the model, using US data from 1983Q1-2004Q1. Our results support the Opportunistic Approach. We find that policymakers respond to the gap between inflation and an intermediate target that reflects the recent history of inflation. We find that there is no response of interest rates to inflation when inflation is within 1% of the intermediate target but a strong response when inflation is further from the intermediate target.
Appears in Collections:School of Social Sciences Research Papers
Brunel Business School Research Papers
Economics and Finance

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