Taylor rule’s influence on policy
However, the actual fact that the Taylor rule has been described in the policy meetings will not necessarily imply it has had a substantial influence on the decisions. One method to analyse the need for the Taylor rule is merely to consider the correlation between your original Taylor rule and the actual Federal Fund’s Rate. Predicated on this process, Taylor (2012) argues that the Fed followed the Taylor rule quite closely until around 2003. From then on, he argues that the Fed abandoned the Taylor rule around 2003 and moved to a far more discretionary monetary policy. Some observers start to see the large deviation from the Taylor rule between 2003 and 2006 as an insurance plan mistake that contributed to the build-up of financial imbalances and the next crisis.