Let’s Talk About the Taylor Rule for Monetary Policy

It has been almost 30 years since the American economist John B. Taylor proposed what has been known as the Taylor rule. The Taylor rule is quoted by news articles especially during the 2020 Corona Virus recession or other periods of economic turmoil. Fund managers and investors want to gauge its guidance on monetary policy. There are also debates by admirable economists concerning how closely the policymakers should follow its predictions., i.e., using it as a prescriptive tool or a benchmarking tool.

Maybe this is the first time you heard the Taylor rule, I will introduce the Taylor rule gently. This post also covers in-depth discussions, hopefully it will be interesting to seasoned economists. I will first explain why the Federal Funds Rate is a powerfully instrument for the Federal Reserve (Fed) to influence the public investment and spending behaviors. I then describe the variation in the CPI source data is not negligible. This variation partly contributes to the debates over whether policymakers should the Taylor rule predictions as a prescriptive tool or as a guiding principle. This article discusses a technical matter: the use of Python Streamlit as an excellent dashboard design instrument. This may interest some data engineers for its elegance as an exhibition tool.