ABSTRACT
The last ten years have witnessed an upsurge in research on monetary policy rule evaluation motivated by the seminal paper of Taylor (1993). Following this study, a great number of researchers have investigated the Federal Reserve’s (the US Central Bank) behaviour using either a simple Taylor rule or some simple variations thereof, like including lags of short-term interest rate or output deviations. Overall, for the US or other developed countries, the Taylor rule explains rather well the behaviour of central banks. Most of the time they stabilize deviations either from a target level inflation or output gap, using an interest rate instrument.
