Taylor rule utility

Taylor Rule Utility

Updated on August 30, 2018

The Taylor rule is an equation John Taylor introduced in a 1993 paper that prescribes a value for the federal funds rate—the short-term interest rate targeted by the Federal Open Market Committee (FOMC)—based on the values of inflation and economic slack such as the output gap or unemployment gap. Since 1993, alternative versions of Taylors original equation have been used and called "simple (monetary) policy rules" (see here and here), "modified Taylor rules," or just "Taylor rules." We use the last term in this web page.

This web page allows users to generate fed funds rate prescriptions for their own Taylor rules based on a generalization of Taylor』s original formula:

formula for the Taylor Rule Calculator

The subscript t denotes a particular quarter of a year while t-1 denotes the quarter before that. FFR denotes the quarterly average of the effective federal funds rate while the hat symbol on the left side of the equation denotes a prescribed value.

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