> >John Taylor might soon be appointed to the Fed Board of Governors.
> >His is the author of The Taylor Rule: if inflation is one percentage
> >point above the Fed's gaol, rates should rise by 1.5 percentage
> >points. And if an economy's total output id one percentage point
> >below its full capacity, rates should fall by half a percentage
> >point. Governor Laurence H. Meyer is a supporter of the Taylor Rule
the typo above is interesting. Wouldn't you say that the Fed sees the U.S.
and world economies as being in the "Fed's gaol"?
BTW, the meaning of this rule (as stated above) can vary a lot according to
what inflation rate the Fed targets (and of course, how inflation is
measured). If it targets 0%, that encourages a recession (since a little
bit of inflation, maybe 1 or even 2 % greases the wheels of commerce). But
that would cause the Fed to cut rates...
This rule would make sense, perhaps, if the Phillips curve were
vertical (and we knew where it and full capacity are and could assume that
they don't change with time).
Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~JDevine
