An Historical Analysis of Monetary Policy Rules

John B. Taylor

NBER Working Paper No. 6768
Issued in October 1998
NBER Program(s):   ME   EFG

This paper examines several episodes in U.S. monetary history using the framework of an interest rate rule for monetary policy. The main finding is that a monetary policy rule in which the interest rate responds to inflation and real output more aggressively than it did in the 1960s and 1970s, or than during the time of the international gold standard, and more like the late 1980s and 1990s, is a good policy rule. Moreover, if one defines rule, then such mistakes have been associated with either high and prolonged inflation or drawn out periods of low capacity utilization.

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Document Object Identifier (DOI): 10.3386/w6768

Published:

• as "Applying Academic Research on Monetary Policy Rules: An Exercise in Translational Economics", The Manchester School, Vol. 66, Issue S, (Supplement 1998): 1-16 ,
• as "The Robustness and Efficiency of Monetary Policy Rules as Guidelines for Interest Rate Setting by the European Central Bank", Journal of Monetary Economics, Vol. 43, no. 3 (June 1999): 655-679 ,
• A Historical Analysis of Monetary Policy Rules, John B. Taylor. in Monetary Policy Rules, Taylor. 1999

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