Actual Federal Reserve Policy Behavior and Interest Rate Rules

[...]It seems clear that the Federal Reserve’s policy behavior overthe 1979:4-1982:3 period (which I refer to as the “earlyVolcker” period) differed from that of other periods.1 Thestated policy of the Federal Reserve during this period was tofocus more on monetary aggregates than it had done before.Any interesting stability question must therefore exclude thisperiod, since any hypothesis of stability that includes it is quitelikely to be rejected. One obvious hypothesis to test is whethera rule’s coefficients were the same before 1979:4 as they wereafter 1982:3. In a recent paper (Fair 2000), I tested thishypothesis using the 1978 specified rule mentioned above, andit was not rejected. Further test results are presented in the nextsection of this article.[...]