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Monetary policy and the long boom

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  • John B. Taylor

Abstract

This article is a reprint of a lecture - given in honor of Homer Jones - that examines the causes of the Long Boom. John B. Taylor defines the Long Boom from 1982 to the present - as the period of time in which the United States has known unprecedented economic stability. This period includes the first and second-longest peacetime expansions in American history, separated by one relatively short and mild national recession. Taylor explores the internal changes in the structure of our economy, as well as external shocks and economic policy. He also discusses the reasons for the change in monetary policy. Monetary policy, he concludes, deserves most of the credit for the Long Boom because current policymakers have been more aggressive in responding to inflation, thereby keeping inflation low and recessions relatively rare. Taylor shows that the type of monetary research encouraged by Homer Jones at the Federal Reserve Bank of St. Louis placed renewed emphasis on the difference between the real interest rate and the nominal interest rate. This type of research sought numerical guidelines for using monetary statistics to make policy, and was responsible - at least in part - for changing monetary policy.

Suggested Citation

  • John B. Taylor, 1998. "Monetary policy and the long boom," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 3-12.
    • Handle: RePEc:fip:fedlrv:y:1998:i:nov:p:3-12:n:6
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    File URL: https://files.stlouisfed.org/files/htdocs/publications/review/98/11/9811jt.pdf
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    References listed on IDEAS

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    1. Milton Friedman, 2013. "Homer Jones: A Personal Reminiscence," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 451-454.
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    Citations

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    Cited by:

    1. Mervyn A. King, 1999. "Challenges for monetary policy : new and old," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 11-57.
    2. Yu Hsing, 2005. "Impacts of macroeconomic policies on the Latvian output and policy implications," Applied Economics Letters, Taylor & Francis Journals, vol. 12(8), pages 467-471.
    3. Hogan, Thomas L., 2015. "Has the Fed improved U.S. economic performance?," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 257-266.
    4. Nelson, Edward & Schwartz, Anna J., 2008. "The impact of Milton Friedman on modern monetary economics: Setting the record straight on Paul Krugman's "Who was Milton Friedman?"," Journal of Monetary Economics, Elsevier, vol. 55(4), pages 835-856, May.
    5. Maral Kichian and Richard Luger, Bank of Canada, 2001. "On Inflation and the Persistence of shocks to Output," Computing in Economics and Finance 2001 184, Society for Computational Economics.
    6. Jean-Pascal Bénassy & Michel Guillard, 2005. "The Taylor Principle and Global Determinacy in a Non-Ricardian World," Documents de recherche 05-26, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
    7. Forte, Antonio, 2009. "The stability of the inflation rate in the Euro area: the role of Globalization and labour market," MPRA Paper 16587, University Library of Munich, Germany.
    8. Siklos, Pierre L. & Skoczylas, Leslaw F., 2002. "Volatility clustering in real interest rates: international evidence," Journal of Macroeconomics, Elsevier, vol. 24(2), pages 193-209, June.
    9. repec:ebl:ecbull:v:15:y:2005:i:5:p:1-10 is not listed on IDEAS
    10. Hartmann, Daniel, 2001. "Taylor-Regel und amerikanische Geldpolitik," Violette Reihe: Schriftenreihe des Promotionsschwerpunkts "Globalisierung und Beschäftigung" 17/2001, University of Hohenheim, Carl von Ossietzky University Oldenburg, Evangelisches Studienwerk.
    11. Edward Nelson, 2008. "Friedman and Taylor on monetary policy rules: a comparison," Review, Federal Reserve Bank of St. Louis, vol. 90(Mar), pages 95-116.
    12. William T. Gavin & Kevin L. Kliesen, 2008. "Forecasting inflation and output: comparing data-rich models with simple rules," Review, Federal Reserve Bank of St. Louis, vol. 90(May), pages 175-192.
    13. Lothian, James R., 2014. "Monetary policy and the twin crises," Journal of International Money and Finance, Elsevier, vol. 49(PB), pages 197-210.
    14. Jean-Pascal Benassy, 2005. "Interest Rate Rules, Price Determinacy and the Value of Money in a non Ricardian World," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(3), pages 651-667, July.
    15. Kevin L. Kliesen & William Poole, 2000. "Agriculture outcomes and monetary policy actions: Kissin' cousins?," Review, Federal Reserve Bank of St. Louis, vol. 82(May), pages 1-12.
    16. Taylor, John B., 2000. "Low inflation, pass-through, and the pricing power of firms," European Economic Review, Elsevier, vol. 44(7), pages 1389-1408, June.
    17. John Taylor, 2000. "Recent changes in trend and cycle, remarks," Proceedings, Federal Reserve Bank of San Francisco.
    18. W A Razzak, 2001. "Money in the era of inflation targeting," Reserve Bank of New Zealand Discussion Paper Series DP2001/02, Reserve Bank of New Zealand.
    19. Cara S. Lown & Donald P. Morgan, 2002. "Credit effects in the monetary mechanism," Economic Policy Review, Federal Reserve Bank of New York, vol. 8(May), pages 217-235.

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