Fair, Ray C. - Cowles Foundation for Research in Economics, Yale University - 2000
Estimated, calibrated, and optimal interest rate rules are examined for their ability to dampen economic fluctuations … caused by random shocks. A tax rate rule is also considered. The results show that the estimated interest rate rule used in … coefficients, such as the Taylor rule, achieve a small reduction in inflation variability at a cost of a large increase in interest …