Although it is generally recognized that the equilibrium real interest rate (ERR) varies over time, most recent work on policy analysis has been carried out under the assumption that this rate is constant. We show how this assumption can affect inferences about the conduct of policy in two...

Remarks at the Andrew Crockett Memorial Lecture, Bank for International Settlements 2013 Annual General Meeting, Basel, Switzerland.

Remarks at the National Association for Business Economics Annual Meeting, New York City.

Remarks at the C. Peter McColough Series on International Economics, Council on Foreign Relations, New York City.

This paper compares the properties of interest rate rules such as simple Taylor rules and rules that respond to price-level fluctuations—called Wicksellian rules—in a basic forward-looking model. By introducing appropriate history dependence in policy, Wicksellian rules perform better than...

John Taylor and David Romer champion an approach to teaching undergraduate macroeconomics that dispenses with the LM half of the IS-LM model and replaces it with a rule for setting the interest rate as a function of inflation and the output gap - i.e., a Taylor rule. But the IS curve is...

We consider the desirability of modifying a standard Taylor rule for a central bank's interest rate policy to incorporate either an adjustment for changes in interest rate spreads (as proposed by Taylor [2008] and McCulley and Toloui [2008]) or a response to variations in the aggregate volume of...

We examine the performance and robustness of monetary policy rules when the central bank and the public have imperfect knowledge of the economy and continuously update their estimates of model parameters. We find that versions of the Taylor rule calibrated to perform well under rational...

Numerous studies have used quarterly data to estimate monetary policy rules or reaction functions that appear to exhibit a very slow partial adjustment of the policy interest rate. The conventional wisdom asserts that this gradual adjustment reflects a policy inertia or interest rate smoothing...

Remarks at the National Association for Business Economics Annual Meeting, New York City.