The Taylor Rule, part 1

I keep referencing an old blog where I broke out the pieces of the Taylor Rule … poorly.  This will be the new one that I point to, and I think that this is pretty interesting so far.  The media is kind of fetishizing the Taylor Rule because it makes the race more interesting: “Will it be Super Dove Janet Yellen who plays fast and loose with the rules or Super Hawk John Taylor whose decisions are super predictable because they’re all based on a perfect model?”

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Former Fed Governor Tarullo doesn’t much care for models based on inflation.

I linked to this piece in the Links post the other day, but I wanted to dive into it a little more thoroughly, as it pertains to the the Fed Chair, Monetary Policy, etc.

I’ll talk a little about my questions regarding internal Fed politics (maybe too much), and then look at former Fed Governor Tarullo’s white paper “Monetary policy without a working theory of inflation”.  He offers some really good insight into the policy and projection making practices at the fed.