The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Taylor Rules

  • Athanasios Orphanides
Reference work entry


Taylor rules are simple monetary policy rules that prescribe how a central bank should adjust its interest rate policy instrument in a systematic manner in response to developments in inflation and macroeconomic activity. This article reviews the development and characteristics of Taylor rules in relation to alternative monetary policy guides and discusses their role for positive and normative monetary policy analysis.


Central banks Difference rules Econometric policy evaluation Federal Reserve System Forecasting Friedman, M. Full employment Inflation Inflation targeting Interest rate rules IS–LM models Macroeconometric models Monetary policy Monetary policy rules Monetary transmission mechanism Money stock Money supply Natural growth of output Natural rate and market rate of interest Natural rate of employment Nominal income Output gap Policy design Price stability Real output Stabilization policy Taylor rules Time consistency Uncertainty Velocity of circulation Wicksell, J. G. K 

JEL Classifications

This is a preview of subscription content, log in to check access.


  1. Bryant, R.C., P. Hooper, and C. Mann, ed. 1993. Evaluating policy regimes: New research in empirical macroeconomics. Washington DC: Brookings.Google Scholar
  2. Clarida, R., J. Gali, and M. Gertler. 1999. The science of monetary policy. Journal of Economic Literature 37: 1661–1707.CrossRefGoogle Scholar
  3. Clarida, R., and M. Gertler. 1997. How the Bundesbank conducts monetary policy. In Reducing inflation: Motivation and strategy, ed. C. Romer and D. Romer. Chicago: University of Chicago Press.Google Scholar
  4. Cooper, J.P., and S. Fischer. 1972. Simulations of monetary rules in the FRB–MIT–Penn model. Journal of Money, Credit and Banking 4: 384–396.CrossRefGoogle Scholar
  5. Friedman, M. 1960. A program for monetary stability. New York: Fordham University Press.Google Scholar
  6. Friedman, M. 1968. The role of monetary policy. American Economic Review 58: 1–17.Google Scholar
  7. Levin, A., V. Wieland, and J.C. Williams. 2003. The performance of forecast-based monetary policy rules under model uncertainty. American Economic Review 93: 622–645.CrossRefGoogle Scholar
  8. McCallum, B.T. 1988. Robustness properties of a rule for monetary policy. Carnegie-Rochester Conference Series on Public Policy 29: 173–203.CrossRefGoogle Scholar
  9. McCallum, B.T. 1993. Specification and analysis of a monetary policy rule for Japan. Bank of Japan Monetary and Economic Studies 11(2): 1–45.Google Scholar
  10. Orphanides, A. 2001. Monetary policy rules based on real-time data. American Economic Review 91: 964–985.CrossRefGoogle Scholar
  11. Orphanides, A. 2003a. Monetary policy evaluation with noisy information. Journal of Monetary Economics 50: 605–631.CrossRefGoogle Scholar
  12. Orphanides, A. 2003b. Historical monetary policy analysis and the Taylor rule. Journal of Monetary Economics 50: 983–1022.CrossRefGoogle Scholar
  13. Orphanides, A., and V. Wieland. 2000. Efficient monetary policy design near price stability. Journal of the Japanese and International Economies 14: 327–365.CrossRefGoogle Scholar
  14. Orphanides, A., and J.C. Williams. 2002. Robust monetary policy rules with unknown natural rates. Brookings Papers on Economic Activity 2002(2): 63–145.CrossRefGoogle Scholar
  15. Orphanides, A., and J.C. Williams. 2007. Inflation targeting under imperfect knowledge. In Monetary policy under inflation targeting, ed. F. Mishkin and K. Schmidt-Hebbel. Santiago: Central Bank of Chile.Google Scholar
  16. Simons, H.C. 1936. Rules vs authorities in monetary policy. Journal of Political Economy 44: 1–30.CrossRefGoogle Scholar
  17. Snyder, C. 1935. The problem of monetary and economic stability. Quarterly Journal of Economics 49: 173–205.CrossRefGoogle Scholar
  18. Taylor, J.B. 1993. Discretion versus policy rules in practice. Carnegie-Rochester Conference Series on Public Policy 39: 195–214.CrossRefGoogle Scholar
  19. Taylor, J.B., ed. 1999. Monetary policy rules. Chicago: University of Chicago.Google Scholar
  20. Wicksell, K. 1898. Interest and prices. Trans. R.F. Kahn. London: Macmillan, 1936.Google Scholar
  21. Woodford, M. 2003. Interest and prices: Foundations of a theory of monetary policy. Princeton: Princeton University Press.Google Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Athanasios Orphanides
    • 1
  1. 1.