Fed Shocked At Its Own Models Predicting "Explosive Inflation"

Fed Confused Reality Doesn't Conform To Its Economic Models, Shocked Its Models Predict "Explosive Inflation"

Below are several excerpts only the brains of those practicing the world's most useless profession (and we are very generous with that assessment) could possibly come up with, in attempting to explain the shocking outcome of reality continuously refusing to comply with their exhaustive and comprehensive Dynamic Stochastic General Equilibrium (DGSE - don't worry: it sounds complicated - it must be very serious and important, and be thus very credible and good at predicting stuff; it is neither) models.

With short-term interest rates at the zero lower bound, forward guidance has become a key tool for central bankers, and yet we know little about its effectiveness. Standard medium-scale DSGE models tend to grossly overestimate the impact of forward guidance on the macroeconomy—a phenomenon we call the “forward guidance puzzle.”
New Keynesian DSGE models following the work of Christiano et al. (2005) and Smets and Wouters (2007) are in principle well suited to study the effects of forward guidance
While the literature has provided strong theoretical justications for the use of such forward guidance (e.g., Eggertsson and Woodford (2003)), the evidence on the quantitative effects of such a policy tool on the macroeconomy is scarce
Empirically, Gurkaynak et al. (2005) and more recently Campbell et al. (2012) found strong evidence that FOMC announcements move asset prices. Yet when Campbell et al. try to assess the impact of exogenous anticipated changes in monetary policy on the macroeconomy, they find that this has the opposite sign than expected, highlighting these identication challenges.
Given that policymakers seldom if ever experimented with forward guidance this far in the future, there is little data to guide them.
The problem, however, is that these DSGE models appear to deliver unreasonably large responses of key macroeconomic variables to central bank announcements about future interest rates (a phenomenon we can call the "forward guidance puzzle")

It gets better:

In general it will always be hard, if not impossible, to test the predictions of DSGE models by looking at the outcome of policy counterfactuals such as the ones in our paper: even if the counterfactual is implemented, this will not occur in a controlled environment.
Nonetheless, we argue that counterfactuals like the one performed here are useful for policy makers in order to quantify the potential eects of their policies, particularly when alternative approaches are lacking as is the case here.
more
http://www.zerohedge.com/news/2012-10-03/fed-confused-reality-does-...

Views: 1214

Reply to This

Replies to This Discussion

  Too bad many friends and neighbors have done nothing to prepare for economic trauma except mock education and watch the CFRtv. Soon some of them may end up eating lead for stealing produce out of my garden. I am going to miss their sneering and jeering faces.

Must see info right here:

CNN Insider: CNN is A Hoax

RSS

"Destroying the New World Order"

TOP CONTENT THIS WEEK

THANK YOU FOR SUPPORTING THE SITE!

mobile page

12160.info/m

12160 Administrators

 

Latest Activity

Doc Vega posted a blog post

Modern Progress

 From some things you just can’t come backNot everyone has your backIt might just be a nuclear…See More
9 hours ago
Bob of the Family Renner favorited tjdavis's photo
11 hours ago
Less Prone favorited Sandy's discussion Sick sci-fi sex fantasy written by Epstein's first benefactor people say inspired his twisted island... before author's SON ended up arresting him
14 hours ago
Doc Vega commented on tjdavis's photo
Thumbnail

Now Playing

"They sure as hell are! "
yesterday
Doc Vega commented on Doc Vega's blog post Plausible Explanation Behind Recent Cryptid Sightings in the Wild!
"cheeki kea, yes they have already produced a Wooly Mammoth by crossing DNA from frozen remains in…"
yesterday
Less Prone favorited tjdavis's photo
yesterday
Less Prone favorited Bob of the Family Renner's photo
yesterday
Less Prone favorited tjdavis's photo
yesterday
Less Prone left a comment for Misteri
"Welcome back!"
yesterday
tjdavis posted blog posts
Wednesday
tjdavis posted photos
Wednesday
tjdavis posted a video

The Inversion: The 'Sentient World Simulation' (SWS)

Kingsley L. Dennis discussing subjects from his new book - 'The Inversion: How We Have Been Tricked into Perceiving a False Reality' (published September 26,...
Wednesday
Doc Vega posted a blog post

Major Technical Developments in 1960 and a Major CIA Disclosure

 In 1960, there were some very significant changes in science, flight research, and oceanography…See More
Monday
Doc Vega's 5 blog posts were featured
Monday
Less Prone favorited Doc Vega's blog post The Saga of Joe Adams May Have Solved What's Behind the Numerous Disappearances Going on in our National Forests
Monday
Zfort Group posted a blog post
Monday
Misteri joined Central Scrutinizer's group
Monday
Misteri joined Machinegunmomma's group
Thumbnail

The Gathering

A place to meet and share contact information with people in your area as an emergency back up…See More
Monday
Misteri is now friends with bob hob and Vladimir Putin
Monday
Misteri updated their profile
Monday

© 2025   Created by truth.   Powered by

Badges  |  Report an Issue  |  Terms of Service

content and site copyright 12160.info 2007-2019 - all rights reserved. unless otherwise noted