Not the Fed Tealbook March 2023
WP 2023/08
Central Bank of Armenia
Working Paper 2023/08
Not the Fed Tealbook March 2023
Angela Papikyan, Vahe Avagyan, and March 2023
Abstract
“Not the Fed Tealbook” simulates a state-of-the-art macroeconomic analysis and streamlined monetary policy note with limited resources. This provides a simple and accessible application of the Forecasting and Policy Analysis (FPAS) Mark II framework that incorporates uncertainty, nonlinearities, and Alan Greenspan’s 2004 formulation of “monetary policy as a risk management exercise.” This conceptual and analytical approach is applied to the US, given its importance in the global macroeconomy and the ready accessibility of data and analysis. The analysis features the key aspects of current stage monetary policy discussions, namely important nonlinearities in economic behaviors and the significance of endogenous policy credibility. The report also highlights the importance for central banks to be transparent about how they are effectively managing the inflation-output (employment) tradeoff in calibrating monetary policy.