(a)
Calculation of quarterly fund rate by Taylor’s rule
Introduction:
Taylor’s rule is a formula developed by Stanford economist John Taylor. It was designed to provide “recommendations” for how a central bank like the Federal Reserve should set short-term interest rates as economic conditions change to achieve both its short-run goal for stabilizing the economy and its long-run goal for inflation.
(b)
Graph of predicted Taylor rule values with the actual quarterly federal funds rate.
(c)
Taylor’s rule and other nonconventional
Introduction:
Monetary policy is used by the central bank to control the liquidity of money from economy to bring the economy to stable condition; this is done through management of interest rate and the money supply.
(d)
Calculation of quarterly fund rate by Taylor’s rule with the change in weights of inflation stabilization and output stabilization
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The Economics of Money, Banking and Financial Markets (11th Edition) (The Pearson Series in Economics)
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