This scatterplot is from Paul Krugman. x is the core inflation rate minus the unemployment rate. y is the federal funds rate. It uses data from 1988 to 2008.
This graph is motivated by a version of the Taylor rule I once proposed. Paul uses a different sample than I did, so he gets slightly different parameter values. Nonetheless, I think Paul and I agree that this equation provides a reasonable first approximation to what the Fed will and should do in response to macroeconomic conditions.
No comments:
Post a Comment