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Bernanke versus Taylor: a post mortem

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  • James S. Fackler
  • W. Douglas McMillin

Abstract

Our analysis sheds light on the issue of whether the monetary policy contributed to the recent housing boom and bust. We have estimated and analysed a model that allows a comparison between the actual policy and several alternative Taylor rules. When the Taylor rule path was computed using revised data and the deflator for the GDP, we found a notable impact on key housing market variables, supporting Taylor's critique of the Fed policy. However, the bulk of our evidence suggests that the policy as it would have been conducted under our real-time Taylor rules would not have had any significant impact on the housing market variables. This conclusion is robust with regard to the price index used as well as the relative weights used on the inflation and output gaps.

Suggested Citation

  • James S. Fackler & W. Douglas McMillin, 2015. "Bernanke versus Taylor: a post mortem," Applied Economics, Taylor & Francis Journals, vol. 47(43), pages 4574-4589, September.
    • Handle: RePEc:taf:applec:v:47:y:2015:i:43:p:4574-4589
    DOI: 10.1080/00036846.2015.1031876
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    1. John B. Taylor, 2007. "Housing and monetary policy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 463-476.
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    Cited by:

    1. Doko Tchatoka, Firmin & Groshenny, Nicolas & Haque, Qazi & Weder, Mark, 2017. "Monetary policy and indeterminacy after the 2001 slump," Journal of Economic Dynamics and Control, Elsevier, vol. 82(C), pages 83-95.

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