Taylor Principle in the Long Run: An Empirical Perspective
Fu-Jen Catholic University, Department of Economics
National Sun Yat-Sen University
April 12, 2012
This paper empirically assesses the Taylor principle in the long run with a small-scale, trivariate structural vector autoregression. Using U.S. data spanning from 1959Q1 to 2010Q2 and different measures of inflation and the output gap, we find that the Taylor principle is supported in the long run given the wide range of short-run policy parameters. Moreover, the Taylor principle is unlikely to hold in the long run in the pre-1979 era.
Number of Pages in PDF File: 31
Keywords: monetary policy, Taylor Principle, structural vector autoregression
JEL Classification: E52, E58working papers series
Date posted: April 13, 2012
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