Taylor interest

In economics, the Taylor interest rate is the interest rate derived from the Taylor rule .

determination

In the special economic field of monetary policy , the Taylor interest rate is derived from the Taylor rule and determined as follows:

${\displaystyle i=r^{*}+p+0{,}5\cdot (p-p^{*})+0{,}5\cdot (y-y^{*})}$

• ${\displaystyle i}$: Taylor interest rate
• ${\displaystyle r^{*}}$: long-term equilibrium real interest rate
• ${\displaystyle p}$: Inflation rate
• ${\displaystyle p^{*}}$: Target rate of central bank inflation
• ${\displaystyle Y}$: Gross domestic product GDP
• ${\displaystyle Y^{*}}$: Trend value of GDP

The large one denotes the GDP, the small denotes the natural logarithm of it, the same applies to : ${\displaystyle Y}$ ${\displaystyle y}$
${\displaystyle Y^{*}}$

• ${\displaystyle y=\ln Y}$
• ${\displaystyle y^{*}=\ln Y^{*}}$

The output gap (output gap) is the relative deviation from the GDP ( ) for trend value of GDP ( ). ${\displaystyle Y}$ ${\displaystyle Y^{*}}$

• Supply gap: ${\displaystyle y-y^{*}=\ln {\frac {Y}{Y^{*}}}={\frac {Y-Y^{*}}{Y^{*}}}}$

The last formula uses that

${\displaystyle \ln x\approx x-1}$

for values close to 1. ${\displaystyle x}$

The Taylor interest rate is also used as a measure of whether the central bank's monetary policy is unusually restrictive (central bank interest rate higher than Taylor interest rate) or unusually expansionary (central bank interest rate lower than Taylor interest rate). To determine the Taylor interest rate, it is necessary that the central banks announce a target inflation rate, at the ECB this is 2%. Taylor also assumed a target inflation rate of 2% for the US central bank . It also assumed 2% for the long-term real equilibrium interest rate.

The supply gap ( English output gap ) is determined as a relative deviation of GDP from the trend value of GDP. A certain uncertainty arises here, since different methods for determining the trend value can lead to different results. Interest rate versus Taylor interest rate graphs should therefore indicate the central bank's target inflation rate, what long-term real interest rate they assume, and what method they used to determine the trend value of GDP.

Occasionally, in a modification of the model, the output gap is replaced by output growth.

Individual evidence

1. ↑ http://www.stanford.edu/~jnteayl/Papers/Discretion.PDF
2. ↑ Archived copy ( memento of the original from March 25, 2012 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice.