The Explanatory Power of Monetary Policy Rules

John B. Taylor ()

No 13685, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper shows that the theory of monetary policy rules is able to explain, predict, and help understand a variety of phenomenon in macroeconomics and finance, including the Great Moderation, the correlation between exchange rates and interest rates, and the shift in the response of the term structure of interest rates to inflation and output. Although the theory was originally designed for normative reasons, it has turned out to have positive implications which validate it scientifically. And while initially focused on the United States, it has applied equally well in other countries.

JEL-codes: E43 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2007-12
Note: EFG ME
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