U.S. Monetary Policy and Econometric Modeling : Tales from the FOMC Transcripts 1984-1991

Note: This is a description of the paper and not the abstract as it appeared in the print journal. We use the transcripts from FOMC meetings over 1984-91 to characterize the interactions between policymakers and builders of macro models in the formulation of U.S. monetary policy. We develop a taxonomy of these interactions and present two case studies. The first case examines the debate on the choice of monetary target, with special attention to zero inflation as a goal. The second case focuses on the 1990/1991 recession. The analysis reveals that U.S. monetary policy relies on models for estimates of both the economic outlook and the response of the economy to policy changes. The analysis also reveals that models evolve to recognize the changing context in which policymakers operate - exchange rate flexibility, financial deregulation, and international trade agreements