Year: 2012
Type: article
Abstract: Taylor (1979) shows that there is a permanent trade‐off between the volatilities of the output gap and inflation. Although a number of papers argue that the so‐called Taylor curve is a policy menu, we use it as an efficiency locus to gauge the appropriateness of monetary policy. We examine the efficiency of U.S. monetary policy from 1875 onward by measuring the orthogonal distance between the observed volatilities of the output gap and inflation from the Taylor curve. We also identify time periods in which the variability of the U.S. economy changed by observing shifts in this efficiency frontier.
Authors: ERIC OLSON, WALTER ENDERS
Institutions: Pepperdine University, University of Alabama
Language: English
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W2168404893