Sunday, November 02, 2014

The Taylor Curve

The Taylor Curve Has Two Dimensions In Both Hemispheres | Economics One:

"But more seriously, the evaluation of inflation-targeting as a strategy for monetary policy in John’s paper—the main purpose of the paper—was also misleading or at least incomplete. Rather than consider the performance of both inflation stability and output stability—as virtually all monetary policy evaluation studies have done for the past 40 years—he looked only at the first—inflation stability. To paraphrase Milton “the second is at least as important as the first.” Yes we know that inflation has been low and steady in recent years. The problem is that output or employment performance has been terrible—in the US we have had the Great Recession and the Not-So-Great Recovery. That deterioration should be part of the evaluation too."

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