Feb
24

Monetary Mischief

The Taylor Rule, a formula proposed by Stanford Professor John Taylor, tells the Fed how to set short-term interest rates. They are to be determined based on three variables: the gap between the actual inflation rate and the desired inflation rate, the gap between actual GDP and potential GDP, and the appropriate short-term interest rate consistent with full employment. The problem, each of the variables can be calculated many ways.

Share This Post
Facebook Twitter Email

Speak Your Mind

*