This paper looks at whether sticky-price New Keynesian models with microfounded inertia can usefully describe US data. We estimate a range of models, considering specifications with either internal or external consumption habits, specifications containing Taylor-type rules or an optimal discretionary rule, and specifications where inflation is driven by movements in either the gap or real margi...

This paper characterizes the properties of various interest-rate rules in a basic forwardlooking model. We compare simple Taylor rules and rules that respond to price-level fluctuations (called Wicksellian rules). We argue that by introducing an appropriate amount of history dependence in policy, Wicksellian rules perform better than optimal Taylor rules in terms of welfare, robustness to alter...

This paper studies the interaction between monetary and macro-prudential policies in a simple model with both nominal and financial frictions. The nominal friction gives rise to a conventional monetary policy objective emphasized in the New Keynesian literature. The financial friction, in the form of an occasionally binding collateral constraint, gives rise to a financial stability objective. ...

The Federal Reserve system (the Fed) is the United States monetary policy authority and is mandated by Congress to pursue two goals: 1) maximum sustainable output and employment and 2) stable prices. Among the actions the Fed can take to achieve these goals is the ability to set the target federal funds rate. Simple policy rules that set the level of funds rate in response to changes in economi...

Clarida, Galí and Gertler (CGG 2000), Orphanides and Williams (2005), Kim and Nelson (2006), and others have found time variation in the Fed’s “Taylor Rule” interest rate policy response function. CGG arbitrarily break their period into two fixedcoefficient 20-year subperiods, however, rather than letting the data tell them when and if any shift in the coefficients occurred. They also proxy the...

This study examines the usefulness of the Taylor-rule framework as an organizing device for describing the policy debate and evolution of monetary policy in the United States. Monetary policy during the 1920s and since the 1951 Treasury-Federal Reserve Accord can be broadly interpreted in terms of this framework with rather surprising consistency. In broad terms, during these periods policy has...

We prove a chain rule in the Goodwillie calculus of functors from spectra to spectra. We show that the derivatives of a composite FG at a base object X are given by taking the composition product of the derivatives of F at G(X) with the derivatives of G at X . Our proof also allows us to say something about the Taylor tower of FG (and not just its layers) in terms of the Taylor towers of F and G.

This paper studies the implication of unit root supply shocks for the Taylor rule. I find that, when supply shocks have a unit root, if a central bank wishes to guarantee the stationarity of inflation, then their interest rate reaction function should not respond to the output gap. Once the stationarity of inflation is guaranteed by the output-gap-response parameter, the ‘‘Taylor principle’’ ca...