Belgian paper finds Fed policy influenced by Taylor rule

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A working paper, published by the National Bank of Belgium on January 21, finds that Federal Reserve policy-makers use a Taylor rule as an "important input" in monetary policy decisions.

The authors, Pelin Ilbas, Øistein Røisland and Tommy Sveen base their model on an adjusted loss function that includes the deviation of the interest rate from a Taylor rule, into which they plug quarterly US economic data from 1990–2007. They find their model outperforms a traditional loss function in fitting

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