Brian Romanchuk — John Taylor Highlights The Uselessness Of Taylor Rules

A "rule" that is discretionary is not a rule. It's a regulation and not a regularity.

Setting a policy rate is a command system that is technocratic without being well-founded under present circumstances. What could go wrong?

Bond Economics
John Taylor Highlights The Uselessness Of Taylor Rules
Brian Romanchuk

William Dupor — Liftoff and the Natural Rate of Interest

Will Duper gives a short summary of the mechanics of monetary policy.

FRBSL
Liftoff and the Natural Rate of Interest
William Dupor, Assistant Vice President and Economist

The Arthurian — "a published formula"

From The New York Times:
House Republicans Resume Efforts to Reduce Fed’s PowerBy BINYAMIN APPELBAUM, JULY 10, 2014
WASHINGTON — House Republicans frustrated by the Federal Reserve’s expansive economic stimulus campaign and its growing role as a financial regulator are renewing their efforts to constrain the central bank.
The Fed would be required to set monetary policy based on a published formula under legislation introduced this week by leading Republicans on the Financial Services Committee. Other bills would eliminate the Fed’s responsibility to maximize employment, or eliminate the Fed entirely.
The bills face uncertain prospects in the House, and have no future in the Senate while it remains under Democratic control. But they highlight ideas that Republicans are likely to revisit if they win a majority in both houses of Congress in the midterm elections.
“We have seen a radical departure from the historic norms of monetary policy conduct,” Representative Jeb Hensarling of Texas, who is chairman of the Financial Services Committee, said at a hearing on Thursday. “Monetary policy is at its best in maintaining stable, healthy economic growth when it follows a clear, predictable rule or path.”

Squaring the circle.

The New Arthurian Economics

"a published formula"
The Arthurian

Paul A. McCulley Pimco letter

Paul McCulley's first letter since unretiring.

PIMCO Macro Perspectives
Just Give Me a Framework
Paul A. McCulley

John Taylor — Don Kohn on Rules-Based Monetary Policy

According to the New York Times, President Obama has narrowed the field of candidates for Fed chair to Larry Summers, Janet Yellin, and Don Kohn. John Taylor gives his impressions of Don Kohn and Taylor rules.

Economics One
Don Kohn on Rules-Based Monetary Policy

John B. Taylor | Mary and Robert Raymond Professor of Economics, Stanford University

(h/t Mark Thoma at Economist's View)

Michael Biggs and Thomas Mayer — How central banks contributed to the financial crisis

Even before the crisis, there were some who stressed that monetary policy should keep an eye on asset bubbles and the growth of credit. This column argues that the policy of inflation targeting, used widely in the 1990s and 2000s, did indeed lead to excessive credit growth that eventually bred financial instability.
VOX
How central banks contributed to the financial crisis
Michael Biggs, Global Economist at Deustche Bank, and Thomas Mayer, Senior Fellow at the Center of Financial Studies, Goethe Universität, Frankfurt

Tom Hickey on the basic issue involved in the JG wrt macro

Repost of a comment of mine at Pragmatic Capitalism follows:

OK, let’s simplify this discussion of the JG. It’s essentially about targeting inflation using a buffer stock of unemployed as a tool (in violation of the Fed’s mandate) through monetary policy or aiming to achieve full employment (less frictional) using fiscal policy and a buffer stock of employed.

The former position is the current standard operating procedure of the Fed, based on the Phillips curve, NAIRU a Taylor rule and other aspects of mainstream monetarist economics. The MMT response is that full employment along with price stability can be achieved through fiscal policy and a buffer stock of employed (JG).

Present Fed monetarist policy reduces full employment by redefining it through positing a supposed natural rate of 4-6%. Now there is talk that the “new normal” may be more like 6-8%. Conversely, MMT claims that actual full employment (less frictional) can be achieved through fiscal policy and a JG, and that this this will actually promote price stability.

Those that reject the MMT solution are choosing the monetarist position over it, and the resultant chronic idle resources and economic underperformance — unless they offer a macro theory theory that resolves the issue differently. Takers?