Free

"Taylor Rule and Inflation Targeting" - Coursework Example

Comments (0) Cite this document
Summary
The Taylor rule asserts that the Federal Reserve relies on the estimated economy’s unutilized resources and inflation behavior to allocate funds rate (Hetzel, 2000). Taylor rule offers recommendations on how the Federal Reserve can address short-term economic changes and…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER97.6% of users find it useful
"Taylor Rule and Inflation Targeting"
Read TextPreview

Extract of sample ""Taylor Rule and Inflation Targeting""

Taylor Rule and Inflation Targeting al Affiliation) Taylor Rule and Inflation Targeting The Taylor rule asserts that the Federal Reserve relies on the estimated economy’s unutilized resources and inflation behavior to allocate funds rate (Hetzel, 2000). Taylor rule offers recommendations on how the Federal Reserve can address short-term economic changes and long-term inflation by setting short-term interest rates. Apparently, this rule is not an effective guide of economic policy. This emanates from the fact that the rule seeks to recommend how the Federal Reserve should control inflation instead of preventing it from occurring (Hetzel, 2000). Indeed, the rule reckons how the Federal Reserve System has raised the funds rate in responding to inflation. Moreover, the rule recognizes an output gap and observed inflation where the Federal Reserve manipulates the output gap to control inflation (Hetzel, 2000). However, there is uncertainty on whether the Taylor rule can offer fundamental explanation on future inflation rates especially in America.
On the other hand, the central bank can use inflation targeting as a monetary policy. Inflation targeting influences the economy since it controls increase in price levels (Jahan, 2015). Indeed, if central bank in the U.S. used inflation targeting, it would declare a target inflation rate and seek to control the actual inflation toward the target inflation by regulating interest rates, which would consequently influence price levels. This will equally lead to a transparent monetary policy since the interest rates changes adopted by the central bank will foster clear and opposite inflation rates (Jahan, 2015). As such, under inflation targeting policy, the American economy would be more transparent and increasingly stable. The use of inflation targeting by the central bank in U.S would enable the economy to respond to economic shocks in the short run since inflation targeting entails “rules” and “discretion” in monetary policy (Jahan, 2015).
References
Hetzel, R. L. (2000). The Taylor Rule: Is It a Useful Guide to Understanding Monetary Policy? Retrieved from https://www.richmondfed.org/-/media/richmondfedorg/publications/research/economic_quarterly/2000/spring/pdf/hetzel.pdf
Jahan, S. (2015). Inflation Targeting: Holding the Line. Retrieved from http://www.imf.org/external/pubs/ft/fandd/basics/target.htm Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“"Taylor Rule and Inflation Targeting" Coursework”, n.d.)
"Taylor Rule and Inflation Targeting" Coursework. Retrieved from https://studentshare.org/macro-microeconomics/1697623-quottaylor-rule-and-inflation-targetingquot
("Taylor Rule and Inflation Targeting&Quot; Coursework)
"Taylor Rule and Inflation Targeting&Quot; Coursework. https://studentshare.org/macro-microeconomics/1697623-quottaylor-rule-and-inflation-targetingquot.
“"Taylor Rule and Inflation Targeting&Quot; Coursework”, n.d. https://studentshare.org/macro-microeconomics/1697623-quottaylor-rule-and-inflation-targetingquot.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF "Taylor Rule and Inflation Targeting"

Inflation targeting

...bank preferences, a relatively underexplored issue is how to translate inflation targets into short-term interest rates. This is the issue of how to map explicit "targets" for monetary policy into monetary policy instruments, or how to implement an inflation-targeting framework. An exception is an important contribution by Svensson (1997). Svensson shows that because of lags in the transmission process of short-term interest rates to inflation, inflation targeting implies inflation forecast targeting. In his analysis, the central bank's forecast becomes an explicit...
7 Pages(1750 words)Essay

Inflation Targeting

... “On Money and Banking” Simply put, inflation targeting is a monetary policy framework that deals primarily with price stability as its primary goal. This is accomplished through the establishment of a specific inflation rate that a country’s central bank would strive to meet over a set period of time. By carefully orchestrating interest rates and other financial instruments in accordance with the intricacies of the market, these targets inflation rates are rendered more feasible and realistic. Perhaps the biggest advantage of utilizing inflation targeting lies in its ability to be easily understood by...
2 Pages(500 words)Essay

"The Graduate" And "Bonnie and Clyde"

...with children. This production would not have exposed infidelity this much owing to the fact that “The Graduate” movie targets a larger audience. "Bonnie and Clyde" movie unethically presents a rare reflection of the full range of human life. Movies should ethically be produced as per human nature reflection as in most cases they target human society as the general viewers. "Bonnie and Clyde" movie contemplates human life presentation as a movie revolving around pitiless cruelty, which emerges as an irritant to the audience. This film aimlessly portrays un-forgiveness at this time we are living. Clyde walked into the bank with a major aim of robbery together with the Barrow Gang (Whitehead 23). This...
1 Pages(250 words)Assignment

"Civil Rights Revolution"

... Civil Rights Revolution The 1960s were the golden years of the civil rights movement; the civil rights movements had gained significant traction in the early 1960s and it seemed inevitable that all Americans would be considered equal in no time. The rise of more vocal and charismatic individuals such as martin Luther King Jnr ensured that the minority groups became better organized in their clamor for equal rights. Furthermore, these leaders undertook to organize nationwide activities that were more effective in capturing the nation’s attention and imagination. This thus made it relatively difficult for the government to ignore the minorities anymore. Besides these minority groups’ leaders, the men that were in charge... Civil Rights...
1 Pages(250 words)Assignment

Brand audit "Heineken"

...Heineken Company Analysis Heineken Company Analysis Brand elements Heineken has been enjoying positive taste of their products with their package design, availing a peculiar edition bottle, which manifests a night-ready uncovered design by light. Dutch beer brand went on to unveil major redesigned bottles; no hype, no Brad Prix and no disco trickery, this was a visual identity among the cans and bottles. The restyling and changing to a longer neck with five bottle sizes were distributed over the world except to US. Americans preferred the classic short-necked bottle. The long-necked is the world standard, other than America (Bergh & Behrer, 2010). The Global Heineken Manager Design & Concept once said that the new global long neck...
7 Pages(1750 words)Essay

"Shiloh"

...Shilo” By B.A. Mason Introduction Bobbie Ann Mason’s narrative “Shiloh” chronicles the troubled marriage of Norma Jean and Leroy Moffitt, which ends at the Shiloh Civil War battleground. The storyline also addresses the social changes that influence individual identity, adding pressure on the Moffitt’s matrimony. In this regard, the story reveals the relationships between family members, for instance, Mabel and the Moffitt’s and friends (Mason, 2001). It is apparent that the women are actively involved in the work to support their families. This makes the Leroy uncomfortable in his marriages because Norma Jean turns out to be more powerful and stronger than him. In the story, the relationship between men and women is supportive... By B.A....
1 Pages(250 words)Essay

"Creative Spark"

...How to Build Creative Confidence How to Build Creative Confidence The talk we analyze in this paper is d how to build your creative confidence by David Keller. Creative confidence is the skill to come up with new ideas and have the self-belief to pursue them. The speaker, David Keller, is the founder, chairman, leader and managing partner of design company IDEO. His managing partner at IDEO is Tom Keller. David Keller is also a professor at Stanford University and has received several credits for his contributions to design and design education. David gave the talk “how to build creative confidence” on May 16th, 2012 (Ted Summaries, 2014). Through the talk, we are able to gain an in depth perspective on creative confidence while... to Build...
2 Pages(500 words)Research Paper

"Faith"

... Religion and Theology 5th May, of My Faith This paper describes the main tenets of my faith. The paper describes my faith through answering the following questions, what do you believe and why? Why is what you believe important? Has the learning about different faith traditions influenced, challenged, enriched or changed what you believe? As a Muslim, I believe in Allah, the one God, the creator of the universe and humankind. I believe that Allah is merciful and compassionate. I also believe that Allah is eternal and sovereign. My beliefs in Allah are based on what Allah himself revealed to his servant Mohammad. I believe that Prophet Mohammad was a true messenger of Allah; I believe that prophet Mohammad was the final... Religion and...
5 Pages(1250 words)Essay

"Modeling Money"

...Modeling Money Money Models A person with the limited economic background would prefer ATM model of since it offersthem an opportunity to minimize the cost of holding cash by balancing the number of transactions from the ATM and with personal income and risk of holding cash (Malz, 2011). Therefore, a person can minimize the cost of holding cash by balancing the frequently of visit the ATM with income and other factors such as nominal interest fee and risk of keeping cash. It is unlike dynamic model that assumes the need for money is based on the prevailing economic conditions beyond their control such as nominal interest rate and inflation rate (Malz, 2011). Also, it is unlike liquidity preference model that assumes all...
1 Pages(250 words)Coursework

"Bullying in Schools"

...it reduces the self-esteem and study ethics. The central idea is that measures should be adopted to avoid the occurrences of bullying in learning facilities. Key Point #1 Bullying in schools occurs in different aspects and forms, including online harassments, physical, emotional and verbal abuses. It is apparent that some bullies target their victims on electronic platforms where they harass them. This takes place on social media channels, especially between peers and classmates who interact frequently. Considering this, bullying can affect the mental health of adolescents who face harassment from peers (Langan, 2013). This is because the trauma stays with them into adulthood whenever they encounter similar treatments...
4 Pages(1000 words)Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Coursework on topic "Taylor Rule and Inflation Targeting" for FREE!

Contact Us