Financial crisis, Taylor rule and the Fed

Saten Kumar

Applied Economics Letters, 2013, vol. 20, issue 17, 1557-1561

Abstract: We investigate how the Federal Reserve (Fed) hit the zero lower bound (ZLB) interest rate while operating under a Taylor-type policy rule. We estimate a reaction function, and the results indicate that during the crisis Fed increased the weight on output without also increasing the weight on inflation which led them to hit the ZLB.0

Date: 2013
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DOI: 10.1080/13504851.2013.829182

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