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This appears in paragraph 3: "The main advantage of a general targeting rule..." To me this implies that the Taylor Rule is a general targeting rule, but the reference for this paragraph (Svensson), says that the Taylor Rule is an "instrument rule," as opposed to a "general targeting rule." If we want to compare it to a general targeting rule, shouldn't we tell the reader what kind of rule the Taylor Rule is? In any case, this sentence doesn't follow naturally from the previous one. I suggest deleting the last two sentences of paragraph three. Michael Stanford (talk) 19:17, 13 July 2020 (UTC)[reply]
This page is copied almost word-for-word from the Federal Reserve Bank of San Francisco's website, here. I'm not sure if this is with permission. —Preceding unsigned comment added by 193.190.134.66 (talk • contribs)
This was taken almost verbatim from San Fran Fed Reserve Page. —Preceding unsigned comment added by 207.243.125.101 (talk • contribs)
The coefficients a are not defined, nor is there discussion as to how they are chosen in practice.PhysPhD 19:30, 14 September 2007 (UTC)[reply]
Agreed. This is still a problem a month later. Crasshopper 01:02, 18 October 2007 (UTC)[reply]
According to Nelson (2000), "UK monetary policy 1972-97: A Guide using Taylor rules", Taylor (1993) asserted that a coefficients of a(pi)=1.5 and a(y)=.5 adequately modeled US Federal Reserve policy up to that time. There is nothing magical about those particular values though, and Taylor (1999) seems to favor higher values. In general though, a(pi) should be greater than one if the economy is to achieve its inflation target on average. (Measure for Measure 19 Oct 2007)
Taylor's original paper wrote the rule like this (see his original paper, page 202):
(In the original paper, r was used in place of i, and p in place of , but the equation was of the form shown here.)
However, many papers today write the rule like this:
Notice that these two versions of the rule are exactly logically and mathematically equivalent. But setting in the first version of the rule is equivalent to setting
in the second version of the rule.
Therefore there has been some confusion among editors as to whether the correct value of the inflation coefficient is 0.5 or 1.5. The answer just depends on how we write the rule. Currently the rule is written in its original version (after all, the page cites the original paper). Therefore the correct value is . But alternatively we could write the rule the second way, which might be more familiar to students today, and then the correct value would be
.--Rinconsoleao (talk) 15:31, 6 August 2008 (UTC)[reply]
Your argument is only partially correct...anyway the 1,5 are from this paper http://www.bankofengland.co.uk/publications/workingpapers/wp120.pdf —Preceding unsigned comment added by 137.208.80.253 (talk) 03:31, 15 April 2010 (UTC)[reply]
I assume that the nominal and equilibrium real interest rates are given in %/year; and that the actual and desired rates of inflation are also in %/year. So can be dimensionless as 0.5 is. However, the logarithms of the actual and potential output must be dimensionless. This means that we need some units (presumably %/year) attached to
However, the suggested value of 0.5 does not have any such units. JRSpriggs (talk) 18:14, 10 April 2009 (UTC)[reply]
Milton Friedman showed that the ideal value for the (risk-free short-term) nominal interest rate is zero. If we assume that at some time ideal conditions exist, the Taylor rule
becomes
and thus
which is true not only under ideal conditions, but under any conditions. In words, the optimal rate of inflation is the negative (i.e. actually deflation) of the equilibrium real (risk-free short-term) rate of interest. JRSpriggs (talk) 18:14, 10 April 2009 (UTC)[reply]
The edits by 94.161.36.128 (talk · contribs) which I reverted a month ago made me wonder whether we should replace with
in the Taylor rule
giving
Although we would like the policy makers' responses to be instantaneous, that is unrealistic. They need to measure the inflation rate and economic output before they can use that information to set an interest rate target. What do you think? JRSpriggs (talk) 23:39, 4 July 2010 (UTC)[reply]
So pp. 2000-2004 are page numbers? If they are, sorry, my mistake. --Biblbroks (talk) 08:46, 9 August 2010 (UTC)[reply]
The picture was deleted on the basis that it does not contribute to our understanding of the Taylor rule. — Preceding unsigned comment added by 130.39.171.137 (talk) 16:15, 12 October 2011 (UTC)[reply]
The picture was deleted again as the article is not about making it friendly or attractive. Moreover, this article is not a biography. For the article to remain as scientific as possible, we need to add a picture that helps explain the Taylor rule. — Preceding unsigned comment added by 130.39.171.137 (talk) 16:08, 27 October 2011 (UTC)[reply]
Dr. Hayo has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:
I would mention in one of the first sentences that it is a specific form of an interest rate rule, in contrast to, say, a money growth rule. .
I would not phrase the rule so much in terms of employment, e.g. 'It is intended to foster price stability and full employment' or 'when output is above its full-employment level'. As long as the rule is specified in terms of an output gap, there is no one-to-one relationship with full employment.
I would mention that the parameter used in Tyalor rules can either be based on a rule of thumb argument, like in Tayor's original paper, or by using econometric estimates.
An estimate of the ECBs Taylor rule in a comparative perspective is presented in ' Hayo, B. and B.Hofmann (2006), Comparing Monetary Policy Reaction Functions: ECB versus Bundesbank, Empirical Economics 31, 645–662.'
Finally, I would mention that a Taylor rule can be approached in terms of a 'positive' research question, how does the Fed's Federal Funds rate react to inflation and output, or a 'normative' research question, namely is the Fed's interest rate setting in line with the recommendations of a Taylor rule?
We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.
Dr. Hayo has published scholarly research which seems to be relevant to this Wikipedia article:
ExpertIdeasBot (talk) 18:50, 27 June 2016 (UTC)[reply]