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The Taylor rule: a guidepost for monetary policy?

Author

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  • Charles T. Carlstrom
  • Timothy S. Fuerst

Abstract

The Taylor rule, which once was mentioned only in scholarly economics journals, now is popping up regularly in newsmagazines, finance journals, and central bankers' speeches. Does the Fed follow the rule? Should it? This Commentary explains what the Taylor rule is, discusses why it seems to describe Fed interest-rate setting, and argues that the rule is most valuable as a guideline rather than a prescription.

Suggested Citation

  • Charles T. Carlstrom & Timothy S. Fuerst, 2003. "The Taylor rule: a guidepost for monetary policy?," Economic Commentary, Federal Reserve Bank of Cleveland, issue Jul.
    • Handle: RePEc:fip:fedcec:y:2003:i:jul
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    Cited by:

    1. Zolotoy, Leon & Frederickson, James R. & Lyon, John D., 2017. "Aggregate earnings and stock market returns: The good, the bad, and the state-dependent," Journal of Banking & Finance, Elsevier, vol. 77(C), pages 157-175.
    2. Mevlut Tatliyer, 2017. "Inflation targeting and the need for a new central banking framework," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 40(4), pages 512-539, October.
    3. Faugere, Christophe, 2010. "Macrofoundations for A (Near) 2% Inflation Target," MPRA Paper 23491, University Library of Munich, Germany, revised 25 Jun 2010.
    4. Smales, Lee A. & Apergis, Nick, 2016. "The influence of FOMC member characteristics on the monetary policy decision-making process," Journal of Banking & Finance, Elsevier, vol. 64(C), pages 216-231.
    5. Vu, Nam T., 2015. "Stock market volatility and international business cycle dynamics: Evidence from OECD economies," Journal of International Money and Finance, Elsevier, vol. 50(C), pages 1-15.
    6. Andrew Young, 2012. "The time structure of production in the US, 2002–2009," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 25(2), pages 77-92, June.
    7. Mikhail V. Oet & Kalle Lyytinen, 2017. "Does Financial Stability Matter to the Fed in Setting US Monetary Policy?," Review of Finance, European Finance Association, vol. 21(1), pages 389-432.

    More about this item

    Keywords

    Monetary policy; Inflation (Finance);

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