An Exit Rule for Monetary Policy
A simple exit rule from the extraordinary measures taken by the Federal Reserve in the past two years is proposed. The rule describes the joint path of the interest rate and the level of reserves. The rule has several attractive properties including a predictable return to traditional monetary policy which had worked well for two decades before the crisis. In addition, the paper divides the financial crisis into three periods: pre-panic, panic and post-panic. It shows that the extraordinary measures probably did not work in the prepanic or the post-panic periods, and may have helped bring on the panic, but may have some positive impact during the panic.
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- John B. Taylor & John C. Williams, 2008.
"A black swan in the money market,"
Working Paper Series
2008-04, Federal Reserve Bank of San Francisco.
- John B. Taylor & John C. Williams, 2009. "A black swan in the money market," Proceedings, Federal Reserve Bank of San Francisco, issue Jan.
- John C. Williams & John B. Taylor, 2009. "A Black Swan in the Money Market," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 58-83, January.
- Johannes C. Stroebel & John B. Taylor, 2009. "Estimated Impact of the Fed's Mortgage-Backed Securities Purchase Program," NBER Working Papers 15626, National Bureau of Economic Research, Inc.
- Daniel L. Thornton, 2009. "Negating the inflation potential of the Fed's lending programs," Economic Synopses, Federal Reserve Bank of St. Louis.
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