Journal Article
Monetary policy when the spyglass is smudged
Abstract: An accurate measure of economic slack is key to properly calibrating monetary policy. Two traditional gauges of slack have become harder to interpret since the Great Recession: the gap between output and its potential level, and the deviation of the unemployment rate from its natural rate. As a consequence, conventional policy rules based on these measures of slack generate wide-ranging policy rate recommendations. This variability highlights one of the challenges policymakers currently face.
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http://www.frbsf.org/economic-research/publications/economic-letter/2014/november/unemployment-monetary-policy-economic-growth-Taylor-rule/el2014-35.pdf
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Bibliographic Information
Provider: Federal Reserve Bank of San Francisco
Part of Series: FRBSF Economic Letter
Publication Date: 2014
Order Number: 35