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Taylor rules
From The New Palgrave Dictionary of Economics, Second Edition, 2008
Edited by
Steven
N.
Durlauf
and
Lawrence
E.
Blume
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Abstract
Taylor rules are simple monetary policy rules that prescribe how a central bank should adjust its interest rate policy instrument in a systematic manner in response to developments in inflation and macroeconomic activity. This article reviews the development and characteristics of Taylor rules in relation to alternative monetary policy guides and discusses their role for positive and normative monetary policy analysis.
Keywords
central banks; difference rules; econometric policy evaluation; Federal Reserve System; forecasting; Friedman, M.; full employment; inflation; inflation targeting; interest rate rules; IS–LM models; macroeconometric models; monetary policy; monetary policy rules; monetary transmission mechanism; money stock; money supply; natural growth of output; natural rate and market rate of interest; natural rate of employment; nominal income; output gap; policy design; price stability; real output; stabilization policy; Taylor rules; time consistency; uncertainty; velocity of circulation; Wicksell, J. G. K.
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How to cite this article
Orphanides, Athanasios. "Taylor rules." The New Palgrave Dictionary of Economics. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2008. The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. 21 May 2013 <http://www.dictionaryofeconomics.com/article?id=pde2008_T000215> doi:10.1057/9780230226203.1686
