• 1 Central bank reaction function: “Taylor rule”
  • 2 Theory of the Taylor rule
  • 3 Empirical Evidence of the Taylor rule
  • 3.1 Preliminaries
  • 3.2 The data issue
  • 3.3 The estimation issue
  • 3.4 Empirical results for ECB policy
  • 3.5 Estimation results for Fed policy
  • 4 Simulations
  • 5 Concluding Remarks
  • REFERENCES