Activist stabilization policy and inflation : the Taylor rule in the 1970s

A number of recent studies have suggested that activist stabilization policy rules responding to inflation and the output gap can attain simultaneously a low and stable rate of inflation as well as a high degree of econo
A number of recent studies have suggested that activist stabilization policy rules responding to inflation and the output gap can attain simultaneously a low and stable rate of inflation as well as a high degree of economic stability. The foremost example of such a strategy is the policy rule proposed by Taylor (1993). In this paper, I demonstrate that the policy settings that would have been suggested by this rule during the 1970s, based on real-time data published by the U.S. Commerce Department, do not greatly differ from actual policy during this period. To the extent macroeconomic outcomes during this period are considered unfavorable, this raises questions regarding the usefulness of this strategy for monetary policy. To the extent the Taylor rule is believed to provide a reasonable guide to monetary policy, this finding raises questions regarding earlier critiques of monetary policy during the 1970s.
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Metadaten
Author:Athanasios Orphanides
URN:urn:nbn:de:hebis:30-10050
Parent Title (English):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2002,15
Series (Serial Number):CFS working paper series (2002, 15)
Document Type:Working Paper
Language:English
Year of Completion:2002
Year of first Publication:2002
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2005/06/13
Tag:Great Inflation ; Output Gap ; Real-time Data; Taylor Rule
SWD-Keyword:Geldpolitik; Geschichte 1968-1979; Taylor-Regel; USA
Pagenumber:30
Source:CFS working paper ; 2002,15
HeBIS PPN:203438728
Institutes:Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:E3 Prices, Business Fluctuations, and Cycles
E52 Monetary Policy
E58 Central Banks and Their Policies
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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