Taylor rule estimation by OLS

We argue for Ordinary Least Squares (OLS) estimation of Taylor rules despite an endogeneity bias. To that end, we show analytically in the three-equation New Keynesian model OLS bias is proportional to fraction variance regressors due monetary shocks. Using simulations, this relationship also holds a quantitative U.S. economy. Since shocks explain only small typical rule regressors, tends be small. Estimating standard using data, find quite similar and Instrumental Variables estimates.