Re: Taylor Rule

[Basil Moore <bmoore@xxxxxxxxxxxxxxxxx>]

Barkley

Damn but you are well informed! How do you keep up with all this info
trivia ? I am soooo impressed. Hope I will see you at the EEA.

To give you some more dope on Taylor, he wrote me a few years ago
respectfully saying he had been my student in Stanford, when I taught money
there in the summer of 1970, and had learned much. I replied by asking him
to look at Verticalists and Horizontalists, but I don't believe he ever
did. They all seem to think the Fed adjusts the short rate by injecting or
with drawing reserves (liquidity), as the texts have it.

But my real point is that I was trying to say that  the CB cannot use the
"Taylor "rule, or any other rule prescriptively. The CB cannot state in
advance what level it will set rates next year. It all depends on the state
of the economy relative to the CB's objectives, and no one, not even the
omniscient Fed., can see into the unknowable future. (As you of course well
know (:>) )

The gov. could, at most, prescribe ceilings and floors to the rate it could
set. But the Fed would oppose those restraints with all its might, probably
correctly.

This is what is meant by "exogenous" interest rates.

Capicho?   Basil

At 01:55 PM 3/1/00 -0500, you wrote:
>      I think some of this was said before, but perhaps it
>is worth repeating anyway.
>      Taylor was on the CEA of President Bush and apparently
>harangued the Fed at that time about adopting some kind
>of "discretionary rule."  He did not write the key paper on his
>rule until about the time he was leaving that position.  Initially
>it was descriptive of what the Fed had apparently been doing
>since the mid-1980s, but by implication it became prescriptive
>in that he criticized what the Fed had done in earlier decades
>by noting its deviations from his rule.  Taylor was also the
>chief economic adviser to the Dole campaign in 1996 and I
>gather is on board with the Bush campaign, apparently with
>hopes of being appointed to the Board of Govs if Bush gets
>elected.  In the meantime some on the Board such as Edward
>Gramlich are clearly favorably viewing the Taylor Rule as a
>useful prescriptive device, even while Greenspan officially and
>formally disdains any set rule.
>       BTW, "New Keynesian" Greg Mankiw is on the McCain
>economic advisory team according to recent reports.  How
>unsurprising........
>Barkley Rosser
>