DataScience@BI seminar with Bjarni Einarsson, Economist, Central Bank of Iceland
Online Monitoring of Policy Optimality.
- Starts:12:00, 18 March 2025
- Ends:13:00, 18 March 2025
- Location:BI - campus Oslo, B3 inner area - next to meeting room B3i-108 or Zoom
- Enrolment deadline:If you plan to attend online, send a message to Siri Johnsen by 9.00 March 18, to recive the Zoom-link.
- Contact:Siri Johnsen (siri.johnsen@bi.no)
Abstract
We present a method for online evaluation of the optimality of the current stance of monetary policy given the most up to date data available. The framework combines estimates of the causal effects of monetary policy tools on inflation and the unemployment gap with forecasts for these target variables. The forecasts are generated with a nowcasting model, incorporating new data as it becomes available, while using entropy tilting to anchor the long end of the forecast at long run survey expectations. In a retrospective analysis of the Fed's monetary policy decisions in the lead up to the Great Recession we find that we can reject the optimality of the policy stance as early as the beginning of February 2008. This early detection stems from the timely nowcasting of the deteriorating unemployment outlook.
Key research areas: Time Series Econometrics, Macroeconometrics, Macroeconomics, Monetary Policy