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Is There a Taylor Rule for All Seasons?
In September 2016 we introduced the Taylor Rule Utility, a tool that allows a user to plot the federal funds rate against the prescription from an equation called the Taylor rule, shown below: image Broadly speaking, the Taylor rule translates readings of inflation (πt) and resource slack (gapt)—often measured by comparing real gross domestic product (GDP) or the unemployment rate to some measure of its "potential" or "natural" level—into a recommended setting for the fed funds rate. The default settings of the rule as of September 2016 (incorporated in the blue dashed line in the chart below) were, apart from ... (full story)