NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Explanatory Power of Monetary Policy Rules

John B. Taylor

NBER Working Paper No. 13685
Issued in December 2007
NBER Program(s):   EFG   ME

This paper shows that the theory of monetary policy rules is able to explain, predict, and help understand a variety of phenomenon in macroeconomics and finance, including the Great Moderation, the correlation between exchange rates and interest rates, and the shift in the response of the term structure of interest rates to inflation and output. Although the theory was originally designed for normative reasons, it has turned out to have positive implications which validate it scientifically. And while initially focused on the United States, it has applied equally well in other countries.

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Document Object Identifier (DOI): 10.3386/w13685

Published: John B Taylor, 2007. "The Explanatory Power of Monetary Policy Rules," Business Economics, Palgrave Macmillan Journals, vol. 42(4), pages 8-15, October. citation courtesy of

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