Work

Taylor Rule Deviations Across Horizons: A Practical Tool for Monetary Policy

Year: 2025

Type: article

Abstract: We propose “Taylor rule yields” across horizons for the United States. Applying the standard Taylor rule to expected paths of inflation and the output gap, we construct a sequence of short‐term rates under neutral monetary policy stances, whose average defines the Taylor rule yield at each horizon. Taylor rule deviations (TRDs), the gaps between market‐expected rates and these yields, excluding risk premia, capture the effective stance of monetary policy even under the effective lower bound (ELB). TRDs also help disentangle the role of the ELB from other factors, offering insight into the severity and nature of the policy constraint.

Source: Journal of money credit and banking

DOI: 10.1111/jmcb.70007

Authors: MASAZUMI HATTORI, TOMOHIDE MINEYAMA, JOUCHI NAKAJIMA

Institution: Hitotsubashi University

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,800

Funder: Japan Society for the Promotion of Science