Christiano, Lawrence J.; Ilut, Cosmin; Motto, Roberto - 2008
Taylor-
rule based monetary policy naturally generates a welfare-reducing boom-bust cycle in
response to a news shock. We … and a central bank blindly
wedded to a conventional Taylor rule, a theory of boom-busts emerges naturally. In our … model, under the standard Taylor rule, the central bank resists the
tendency of inflation to decelerate by cutting the …