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Join us for the third in the Summer 2021 QCGBF Virtual Seminar Series, with Adam Shapiro who will be presenting on his and Daniel J. Wilson's paper 'Taking the Fed at its Word: A New Approach to Estimating Central Bank Objectives using Text Analysis'.
We propose a new approach to estimating central bank preferences, including the implicit inflation target, that requires no priors on the underlying macroeconomic structure nor observation of monetary policy actions. Our approach entails directly estimating the central bank’s objective function from the sentiment expressed by policymakers in their internal meetings. We apply the approach to the objective function of the U.S. Federal Open Market Committee (FOMC). The results challenge two key aspects of conventional wisdom regarding FOMC preferences. First, theFOMC had an implicit inflation target of approximately 1 1/2 percent on average over our baseline 2000 - 2011 sample period, significantly below the commonly-assumed value of 2. Second, the FOMC’s loss depends strongly on output growth and stock market performance and less so on their perception of current economic slack.
About the Speaker
Adam is Vice President of Macro Analysis and Economic Geography at the Federal Reserve Bank of San Francisco. He has been with the research department since 2012. Adam’s research primarily aims at understanding price and inflation dynamics, and his research has appeared in the Journal of Political Economy, the Review of Economics and Statistics, the Journal of Econometrics, the Journal of Law & Economics, and the Journal of International Economics.
Adam completed his Ph.D. and M.A. in Economics at Boston University, and his B.A. in Economics and Mathematics at Columbia University.