Inconsistent Monetary Policy Rules Could Complicate Economic Decision-Making.
The article discusses how estimating simple monetary policy rules can lead to inconsistent results. By simulating a macroeconomic model similar to Taylor's, the researchers found that different versions of policy rules can appear to have lagged interest rates or forward-looking behavior. This explains why various authors have found different monetary policy rules that fit U.S. data well. The study also highlights issues that could complicate the practical use of Taylor rules.