Investopedia

Continue to Site »

Taylor's Rule

Filed Under » , ,
Dictionary Says

Definition of 'Taylor's Rule'

A guideline for interest rate manipulation. Taylor's rule was introduced by Stanford economist John Taylor in order to set and adjust prudent rates that will stabilize the economy in the short-term and still maintain long-term growth. This rule is based on three factors:

1) Actual versus targeted inflation levels
2) Actual employment versus full employment levels
3) The appropriate short-term interest rate consistent with full employment.
Investopedia Says

Investopedia explains 'Taylor's Rule'

Taylor's rule suggests that the Fed increases interest rates in times of high inflation, or when employment is above the full employment levels, and decreases interest rates in the opposite situations. This method of controlling interest rates has been fairly consistent with interest policy decisions, even though the Fed does not explicitly subscribe to the rule.

Articles Of Interest

  1.

    Forces Behind Interest Rates

    Get a deeper understanding of the importance of interest rates and what makes them change.

  2. Why The Consumer Price Index Is Controversial

    Find out why economists are torn about how to calculate inflation.

  3. Predict Inflation With The Producer Price Index

    Find out how the PPI can be used to gauge the overall health of the economy.

  4. Leading Economic Indicators Predict Market Trends

    Leading indicators help investors to predict and react to where the market is headed.

  5. Austerity: When The Government Tightens Its Belt

    When a government tightens its belt in tough economic times the entire nation feels the squeeze.

  6. Will Quantitative Easing Be Japan's Savior?

    The quantitative easing program, recently announced by the new governor of the Bank of Japan, Haruhiko Kuroda, is for a cash infusion of $1.4 trillion by the end of 2014. Will it help the Japanese ...

  7. Inspecting A Country's Debt

    Tensions over just how to handle debt are pitting the rich world against the developing world like never before.

  8. All The Cliffs You Need To Know About

    In addition to the oft-cited fiscal cliff, there are economic, tax, political, geopolitical and earnings pitfalls to avoid.

  9. Countries With The Fastest And Slowest GDP Growth

    Discover which countries have shown the most growth since 1980, and which have shown the more ignominious fizzle and pop.

  10. A Primer On Reserve Currencies

    For nearly a century, the U.S. dollar has served as the world's premier reserve currency, but the future is uncertain.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.

  2. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  3. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  4. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  5. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  6. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.
Trading Center
Array ( )
taggroups(for debug only):
Array ( [0] => Economy And Economics [1] => Economics )