Real-time Taylor rules and the federal funds futures market

Abstract

This article compares movements in the federal funds rate from 1987 through 1997 with predictions from the federal funds market and a Taylor rule using unemployment and core CPI data. Although a Taylor rule using revised data does about as well as the futures market predictions, the best real-time predictions would have produced forecast errors about 50 percent larger than the futures data.Federal funds market (United States) ; Federal funds market (United States) ; Monetary policy