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Federal Reserve Bank of San Francisco
Economic Review
Taylor's rule and the Fed, 1970-1997
John P. Judd
Glenn D. Rudebusch

This paper estimates a simple model of the Federal Reserve's "reaction function" - that is, the relationship between economic developments and the fed's response to them. We focus on how this estimated reaction function has changed over time. Such changes are not surprising given compositional changes in the Federal Open Market Committee, and we consider three subsamples delineated by the terms of recent fed Chairmen. We find that the estimated reaction functions for each period vary in ways that seem broadly consistent with the success or failure during the period at controlling inflation. These results suggest that a Taylor-rule framework is a useful way to summarize key elements of monetary policy.

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John P. Judd & Glenn D. Rudebusch, "Taylor's rule and the Fed, 1970-1997" , Federal Reserve Bank of San Francisco, Economic Review, pages 3-16, number 3, 1998.
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Keywords: Monetary policy - United States ; Federal Open Market Committee ; Federal funds market (United States)
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