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: 1212

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 commented on Doc Vega's blog post One of Many Witnesses to the JFK Assassination Not Listed in the Warren Report
"tjdavis Thanks for your support! "
22 hours ago
Doc Vega posted blog posts
22 hours ago
tjdavis favorited Doc Vega's blog post One of Many Witnesses to the JFK Assassination Not Listed in the Warren Report
yesterday
Burbia commented on KLC's group MUSICWARS
Thursday
Doc Vega posted a blog post

The Unnerving Frequency of Disappearances on the Appalachian Trail Pt. 1

There’s another one of the cluster zones of missing persons reports that fails to render the…See More
Wednesday
cheeki kea commented on cheeki kea's photo
Thumbnail

Waste runs deep

"Make USAID - go away."
Wednesday
cheeki kea posted a photo
Wednesday
cheeki kea commented on cheeki kea's photo
Thumbnail

$ Paid Annual Leave $

"Now is the Time for American Workers to Unite! Take back the squandered taxes and demand time off…"
Monday
cheeki kea posted a photo
Monday
Burbia commented on Burbia's blog post Mystery illness strikes Russia with fever, blood symptoms, and no cure in sight.
Monday
Burbia posted a blog post

Mystery illness strikes Russia with fever, blood symptoms, and no cure in sight.

I guess releasing this bio-weapon upon Israeli neighbors would be hitting too close to home. I…See More
Monday
tjdavis posted videos
Monday
tjdavis posted a video

The Electric State | Final Trailer | Netflix

Together, robots & humans can take the whole system down. THE ELECTRIC STATE starring Millie Bobby Brown, Chris Pratt and directed by the Russo Brothers, onl...
Mar 29
Less Prone favorited Sandy's video
Mar 29
Doc Vega's 7 blog posts were featured
Mar 29
tjdavis's blog post was featured
Mar 29
Sandy posted a video

"Mommy Tells Me I'm a Girl"-Jeff Younger

Soft White Underbelly interview and portrait of Jeff Younger, a father who is fighting to protect his son from transitioning into a girl. Get 40% off access ...
Mar 29
tjdavis posted a video

MindWar: Full Spectrum Cognitive Dominance [Michael Aquino Analysis]

This is my analysis and my thoughts on Michael Aquino's "MindWar". This document is a must-read if you are looking to understand the psyop tactics and cognit...
Mar 28
Doc Vega posted a blog post

A Horrid Murder at Land Between the Lakes (Sasquatch?)

 Most of us hear that Sasquatch-Bigfoot are intelligent yet reclusive creatures that are closely…See More
Mar 28
Doc Vega posted blog posts
Mar 27

© 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