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The Explanatory Power of Monetary Policy Rules

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  • John B Taylor

Abstract

Over the past 20 years, the use of monetary policy rules has become pervasive in analyzing and prescribing monetary policy. This paper traces the development of such rules and their use in the analysis, prediction, and stabilization of national economies. In particular, rules provide insight into eras in which monetary policy was not effective as well as when it was, such as the persistence of the ongoing “Great Moderation.” The paper stresses the “scientific” contributions of rules, including their insight into fluctuations of housing construction and exchange rates, as well as into the term structure of interest rates.Business Economics (2007) 42, 8–15; doi:10.2145/20070401

Suggested Citation

  • John B Taylor, 2007. "The Explanatory Power of Monetary Policy Rules," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 42(4), pages 8-15, October.
    • Handle: RePEc:pal:buseco:v:42:y:2007:i:4:p:8-15
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    1. Charles Engel & Nelson C. Mark & Kenneth D. West, 2008. "Exchange Rate Models Are Not as Bad as You Think," NBER Chapters, in: NBER Macroeconomics Annual 2007, Volume 22, pages 381-441, National Bureau of Economic Research, Inc.
    2. Andrew Ang & Sen Dong & Monika Piazzesi, 2005. "No-arbitrage Taylor rules," Proceedings, Federal Reserve Bank of San Francisco.
    3. Jeffrey C. Fuhrer, 1996. "Monetary Policy Shifts and Long-Term Interest Rates," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(4), pages 1183-1209.
    4. Engel, Charles & West, Kenneth D., 2006. "Taylor Rules and the Deutschmark: Dollar Real Exchange Rate," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(5), pages 1175-1194, August.
    5. John P. Judd & Bharat Trehan, 1995. "Has the Fed gotten tougher on inflation?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue mar31.
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    More about this item

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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