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What to Expect from a Yellen Fed
Western | November 1,2013

Michael Bazdarich discusses what new leadership could mean for Fed policymaking

  • A Yellen Fed would most likely continue the pattern of its immediate predecessors of being consensus-driven and communicative
  • In terms of policy implementation, Ms. Yellen has proposed two possible alternatives to the Taylor Rule: a "balanced approach" that would pay more attention to economic weakness than does the Taylor Rule and "an optimal control policy," whereby policy paths would be evaluated based on their expected effects on economic growth and inflation
  • With the Fed funds rate currently stuck near zero, either of these approaches would have to rely on transparency and credibility with the financial markets if they are to prove successful
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