Stanford University's Taylor on the Taylor Rule

The video discusses the debate on potential economic growth and the equilibrium real interest rate, which has shifted from 4% to possibly lower. It examines the Taylor rule's relevance in current economic conditions and the challenges of implementing rate cuts to stimulate the economy. The discussion also covers the potential use of negative interest rates and their implications, with a focus on future policy strategies.

What is the current debate regarding the equilibrium real interest rate?

• Whether it should be increased to 5%

• If it has decreased from 4% to possibly lower

• The impact of unemployment on interest rates

• The role of inflation in determining interest rates

What was the growth rate when the Taylor rule was first proposed?

• 3%

• 4%

• 5%

• 2.2%

Why is it challenging to have low growth rates according to the discussion?

• It causes a rise in interest rates

• It results in increased unemployment

• It complicates the application of economic rules

• It leads to higher inflation

What is a potential issue with implementing negative interest rates?

• They are universally accepted by central banks

• They always lead to economic growth

• They have been highly successful in Japan

• They may not pass through the markets effectively

What does the Taylor rule suggest about the Fed funds rate?

• It should be higher than the policy rate

• It should be much lower than the policy rate

• It should remain unchanged

• It should be equal to the inflation rate