A Defence of the FOMC

JEL codes: 
C53, E52, E58
Series number: 
Version Date: 
Sep 2009

We defend the forecasting performance of the FOMC from the recent criticism of Christina and David Romer. Our argument is that the FOMC forecasts a
worst-case scenario that it uses to design decisions that will work well enough (are robust) despite possible misspecification of its model. Because these
FOMC forecasts are not predictions of what the FOMC expects to occur under its model, it is inappropriate to compare their performance in a horse race
against other forecasts. Our interpretation of the FOMC as a robust policymaker can explain all the findings of the Romers and rationalises differences between FOMC forecasts and forecasts published in the Greenbook by the staff of the Federal Reserve System.

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