Taylor's MicroEconomics 3/e

Talk About Taylor

"Could One Little Rule Explain All of Economics?" from The Wall Street Journal

"The Taylor rule has made its formulator popular with financial-market analysts: It gives them a seemingly scientific way to explain and predict interest rates in the U.S. and Europe. 'It's amazing that such a simple rule with only two explanatory factors fits the data so very well,' says Leonardo Liederman, the Bank of Israel's top researcher...Today, in textbooks and practical central banking, the Taylor rule has replaced the rule offered by Nobel laureate Milton Friedman: set a target for growth in the money supply and maintain it. Mr. Taylor's rule has a couple of virtues: it focuses on short-term interest rates, as the Fed and ECB do in practice. And unlike calls for central banks to announce and aim at inflation-rate targets, the Taylor rule reflects a view held by politicians, the public and some economists: central banks ought to resist recessions as well as inflation."

from "Could One Little Rule Explain All of Economics?"
The Wall Street Journal, 7 February 2000, p. B1; B4.