This paper proposes a general method for deriving an optimal monetary policy rule in the case of a dynamic linear rational-expectations model and a quadratic objective function for policy. A commitment to a rule of the type proposed results in a determinate equilibrium in which the responses to shocks are optimal. Furthermore, the optimality of the proposed policy rule is independent of the spe...

What inflation rate should the central bank target? We address determinacy issues related to this question in a two-sector model in which prices can differ in equilibrium. We assume that the degree of nominal price stickiness can vary across the sectors and that labor is immobile. The contribution of this paper is to demonstrate that a modified Taylor Principle holds in this environment. If the...

I would like to add my voice to the chorus in thanking President Fisher and the Dallas Fed for hosting this conference honoring John Taylor. It is a particular pleasure to have been invited to join this distinguished panel and to have this opportunity to discuss some of John Taylor's many important contributions to economics and monetary policy. In looking back at his work, I am struck by how t...

In this paper, we assume that the COVID-19 pandemic exerts a time-varying asymmetric impact on RMB exchange rate. Based Taylor rule model, examine rate fluctuations around outbreak of COVID-19. We find rose steadily before but fluctuated during pandemic. This shows had transient