Changes in the economy challenge traditional methods of evaluating monetary policy
JulkaisusarjaBank of Finland. Bulletin
JulkaisijaBank of Finland
Julkaisun pysyvä osoite onhttps://urn.fi/URN:NBN:fi:bof-201802161229
Euro area monetary policy has provided the economy with strong support in recent years. Many traditional guidelines used for evaluating the policy stance, such as the Taylor rule, would call for a more restrictive form of monetary policy. However, a number of variations can be derived from the relatively simple base formula underlying the Taylor rule, providing alternative paths for benchmark interest rates. Thus we could argue that recent monetary policy has not, in fact, significantly deviated from interest rate paths that are consistent with variations of the Taylor rule. The economy has recently undergone changes that provide justification for the more accommodative policy stance. Thus, monetary policy cannot solely be determined on the basis of simplistic rules.