Inference Using Qualitative And Quantitative Information With An Application To Monetary Policy
I propose a framework for drawing inferences about an unobserved variable using qualitative and quantitative information. Using this framework, I study the timing and persistence of monetary policy regimes and compute probabilistic measures of the qualitative indicator's reliability. These estimates suggest that (1) it is over one and one-half times more likely that monetary policy is not restrictive at any point in time, (2) Boschen and Mills's  policy index is a reliable indicator of the stance of monetary policy, and (3) certain qualitative indicators of monetary policy improve interest rate forecasts that are based on linear forecasting models. (JEL C22, E52)
Philip N. Jefferson.
"Inference Using Qualitative And Quantitative Information With An Application To Monetary Policy".