Taylor Rule

The Taylor Rule is a monetary policy guideline proposed by economist John Taylor in 1993. It suggests that the central bank should adjust the nominal interest rate in response to changes in inflation and output. The rule is based on the idea that the central bank should use its monetary policy tools to stabilize the economy and keep inflation and output at their desired levels. The Taylor Rule is widely used by central banks around the world to set their monetary policy.

History of the Taylor Rule

The Taylor Rule was first proposed by economist John Taylor in 1993. Taylor argued that the central bank should adjust the nominal interest rate in response to changes in inflation and output. He proposed that the central bank should set the nominal interest rate according to a formula that takes into account the current inflation rate, the target inflation rate, and the current output gap. The Taylor Rule has since been widely adopted by central banks around the world as a guideline for setting their monetary policy.

Comparison of Taylor Rule and Other Monetary Policy Rules

Summary

The Taylor Rule is a monetary policy guideline proposed by economist John Taylor in 1993. It suggests that the central bank should adjust the nominal interest rate in response to changes in inflation and output. The rule is based on the idea that the central bank should use its monetary policy tools to stabilize the economy and keep inflation and output at their desired levels. The Taylor Rule has since been widely adopted by central banks around the world as a guideline for setting their monetary policy. For more information about the Taylor Rule, visit the websites of the Federal Reserve, the Bank of England, and the European Central Bank.

See Also

• Monetarist Rule
• Keynesian Rule
• Inflation Targeting
• Output Gap
• Monetary Policy
• Interest Rate
• Central Bank
• Federal Reserve
• Bank of England
• European Central Bank

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