PL EN


2008 | 19 | 7-8 | 1-23
Article title

THE TAYLOR RULE AND ITS EXTENSION

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Selected contents from this journal
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Languages of publication
PL
Abstracts
EN
The paper discusses the key aspects of research on a modern monetary policy rule proposed by American economist John B. Taylor in 1993. The Taylor rule stipulates how much the central bank should change the nominal interest rate in response to divergences of actual GDP from potential GDP and divergences of actual rates of inflation from a target rate of inflation. The rule recommends a relatively high interest rate (a 'tight' monetary policy) when inflation is above its target or when the economy is above its full employment level, and a relatively low interest rate ('easy' monetary policy) in the opposite situations. The author discusses many aspects of the Taylor rule, including the type of interest rates subject to analysis; the need to use real-time data; additional variables that may influence interest rates; the method of measuring variables; and the stability of the analyzed parameters. The paper also shows how the Taylor rule is used in practice. The rule can be used to analyze monetary policy, make international comparisons, and forecast interest rates. It can be an important component of both theoretical and empirical economic models.
Year
Volume
19
Issue
7-8
Pages
1-23
Physical description
Document type
ARTICLE
Contributors
author
  • P. Baranowski, Uniwersytet Lódzki, Katedra Ekonometrii, ul. Rewolucji 1905 r. nr 41, 90-124 Lódz, Poland
References
Document Type
Publication order reference
Identifiers
CEJSH db identifier
08PLAAAA05069627
YADDA identifier
bwmeta1.element.742e2623-9dea-32ec-853e-477c1435086b
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