new user here… prepping for level 3 next year. i need help fully understanding the taylor rule. i understand the basic calculation. but is there something else i need to understand?? something i’m missing??? for the love of god someone help me out here.
Ms. Elizabeth Taylor, if you had the patience and drive to marry 7 different men, then understanding the Taylor Rule should be a piece of cake for you. Good luck!
What’s going on all these newbies asking questions after the exam? Did you just take Level II? Why don’t you enjoy the rest of the summer instead worrying about Level III…You will have enough information about it when you receive books from CFAI once you’re registered…
no, i didn’t just take level 2. but for the last few days i can’t get the g*ddamn taylor rule off my mind, and when i refer to the cfai text, it’s no help.
elizabeth taylor Wrote: ------------------------------------------------------- > new user here… prepping for level 3 next year. > > i need help fully understanding the taylor rule. > i understand the basic calculation. but is there > something else i need to understand?? something > i’m missing??? for the love of god someone help me > out here. are you referring to Taylor rule as Liz Taylor or Taylor rule in economics? either way…you should know the answer.
no one care to shed light on this? truly stinks we’re not allowed to discuss topics because this one in particular is really gnawing away at me.
what do you wanna know Taylor?
I don’t mean to sound like a jerk, but the taylor rule is really straightforward. What exactly is confusing you? The wiki page alone is pretty clear.
wake2000 Wrote: ------------------------------------------------------- > what do you wanna know Taylor? i really shouldn’t get too specific, wake, don’t want to get myself or anyone else in trouble. i thought the general response to my post would be something like “yeah, wtf!” but i guess i’m the only one.
My take: Taylor rule predicts economic expansion or contraction. If positive then there should be loose economic rules in place. If Taylor rule was postive and it predicted a contraction then that would be an incorrect application of the Taylor rule.
wake2000 Wrote: ------------------------------------------------------- > what do you wanna know Taylor? i bet this person with this username is actually a dude. or is it a coincidence, that he named himself elizabeth taylor and now asking quesiton on taylor rule in his first post? maybe he thought it will be funny.
One_Day Wrote: ------------------------------------------------------- > My take: Taylor rule predicts economic expansion > or contraction. If positive then there should be > loose economic rules in place. If Taylor rule was > postive and it predicted a contraction then that > would be an incorrect application of the Taylor > rule. thanks one-day, i think you’re getting at my confusion. but i don’t fully understand your explanation - what u mean by “postitive”? my understanding of the rule is: neutral rate plus half of the inflation gap plus half of the output gap = the target (ideal) rate. so let’s say the current rate set by the Fed is 7%. and the Taylor equation gives you 8%. would that be “positive”?
think about the equation. if you have inflation and GDP growth higher than where it’s been trending, would this intuitively signal that you need to tighten or loosen your monetary policy? you can do this… pretend you’re bernanke. or greenspan maybe many years ago. or china.
bannisja Wrote: ------------------------------------------------------- > think about the equation. if you have inflation > and GDP growth higher than where it’s been > trending, would this intuitively signal that you > need to tighten or loosen your monetary policy? > you can do this… pretend you’re bernanke. or > greenspan maybe many years ago. or china. makes perfect sense, and i know i must seem like a freakin retard asking these questions… i’m just gonna chalk this one up to being to hurried/stressed - clearly i am the only one who was thrown off.
I cant believe you created a user name for one frickin’ question. Pleaset let your next username be Contango and Cash.
wake2000 Wrote: ------------------------------------------------------- > I cant believe you created a user name for one > frickin’ question. Pleaset let your next username > be Contango and Cash. +1.
wake2000 Wrote: ------------------------------------------------------- > I cant believe you created a user name for one > frickin’ question. Pleaset let your next username > be Contango and Cash. +1. That was on TV in the UK a week or so before the exam. Needless to say, I had to watch it. “I don’t know about you, but I have an aversion to getting F.U.B.A.R…”
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.128.5004&rep=rep1&type=pdf In the decade since John B. Taylor’s celebrated essay on \Discretion versus policy rules in practice" was presented at the 39th Carnegie-Rochester Conference on Public Policy in the Fall of 1992, his analysis has had considerable influence on the way monetary economists and practitioners think about the policy debate. This success can be attributed to Taylor’s captivating synthesis of several important aspects of monetary economics with a deceivingly simple policy rule, one that, in Taylor’s own words, is \simple enough to put on the back of a business card!"1 Taylor provided a balanced exposition of the usefulness of macroecono- metric policy evaluation of simple policy rules in the context of the rules versus discretion debate, and illustrated that actual monetary policy in the United States could be usefully described in terms of a simple rule that appeared promising on the basis of such policy evaluation experiments. Most importantly, he described the monetary policy process in terms of the short-term interest rate which placed it close to the actual decision making process, and described policy directly in terms of developments regarding the two major operational objectives of monetary policy, inflation and economic growth.
Well thank god that is cleared up!
PASS!!!