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Financial Crisis, Taylor Rule and the Fed

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  • Saten Kumar

    (Department of Economics, Faculty of Business and Law, Auckland University of Technology)

Abstract

We investigate how the Federal Reserve (Fed) hit the zero lower bound (ZLB) interest rate while operating under a Taylor-type policy rule. We estimate a reaction function and the results indicate that during the crisis Fed increased the weight on output without also increasing the weight on inflation led them to hit the ZLB.

Suggested Citation

  • Saten Kumar, 2014. "Financial Crisis, Taylor Rule and the Fed," Working Papers 2014-02, Auckland University of Technology, Department of Economics.
    • Handle: RePEc:aut:wpaper:201402
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    References listed on IDEAS

    as
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    5. McCallum, Bennett T., 1999. "Issues in the design of monetary policy rules," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 23, pages 1483-1530, Elsevier.
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    More about this item

    Keywords

    Ambiguity; Belief Function; Investment Bubble; Inference;
    All these keywords.

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