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 to 2004Q1. Our results support the opportunistic approach. We find that policy-makers 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 per cent of the intermediate target but a strong response when inflation is further from the intermediate target.
| Original language | English |
|---|---|
| Pages (from-to) | 110-125 |
| Number of pages | 16 |
| Journal | Manchester School |
| Volume | 78 |
| Issue number | 2 |
| Early online date | 15 Jan 2010 |
| DOIs | |
| Publication status | Published - Mar 2010 |
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Cite this
Martin, C., & Milas, C. (2010). Testing the opportunistic approach to monetary policy. Manchester School, 78(2), 110-125. https://doi.org/10.1111/j.1467-9957.2009.02133.x