12/21/2023 0 Comments Npr hourly news summary transcriptShe points out that, yes, the formula can work a lot of the time. WOODS: The Taylor Rule does have its critics, notably Janet Yellen, the former Fed chair and now treasury secretary. And in his view, policy rules like the Taylor Rule work better than human judgment most of the time. And as the years go on, John is trying to promote this idea. If the rule had been followed, maybe we could have avoided those crashes. It was also in the early 2000s, when low interest rates contributed to massive housing price growth, fueling the speculative bubble that led to the Great Recession in 2008.ĬHILDS: John felt like his historical analysis vindicated the Taylor Rule. WOODS: And when the Fed had deviated from the Taylor Rule, that was the 1970s, when inflation got so high that the Fed had to crash the economy in the early '80s to stamp it out. ![]() That's for sure.ĬHILDS: John crunched the numbers for his rule, and he found that it described fairly closely what the Federal Reserve had actually done in the 1980s and would go on to do in the 1990s. TAYLOR: I didn't think it'd be so important or useful. And you also take into account how overheated or undercooked the wider economy is as well.ĬHILDS: And those two factors together, inflation and the state of the economy - that's more or less it. And then the Taylor Rule says that you would raise interest rates by 1 1/2 percentage points. And so let's say you have inflation bubbling along at 2%, but then one day it spikes up to 3%. So we've got this target for the Fed, usually. Raise interest rates by more than the spike in inflation. WOODS: And in the early 1990s, John developed his recipe, which was essentially this. Can't we simplify it? We want it to be available for everybody. TAYLOR: Gee, this recipe is so complicated. ![]() John didn't think these models would work for policymakers. WOODS: John was looking for a way to guide Fed officials towards keeping the economy growing steadily - not too much inflation, not too much unemployment.ĬHILDS: But a lot of the recipes out there giving models for how the central banks should raise or lower interest rates had a lot of inputs and equations. So I started with, how can we conduct policy in a more understandable way? It didn't seem like the way we should be conducting policy. JOHN TAYLOR: We had money growth high, money growth low. He was working at the Council of Economic Advisers under President Ford. There may also be other languages available in this menu.MARY CHILDS, BYLINE: John Taylor was an economist then, recently out of his Ph.D. If available, you'll be able to choose a transcript that has been transcribed by one of our TED Translators.Click that text to open a menu with all language options.If a human-created translation is not available, YouTube will default to automatic captions, which are not always accurate.At the bottom of the transcript, you might see the text "English (auto-generated)".The transcript will open in a window to the right of the video player.Click *Open Transcript* (if it's available).Click the "3 dots" icon located next to the *Share* button.Let us know at can access transcripts for most TED talks on YouTube by following these steps: Transcripts are not currently available in the TED app for iOS or Android, though it's a feature our developers will be glad to consider. It's important to note that the transcript will cover the video itself, so it might be a better option to use subtitles (which are available for any video that has a transcript). You can access interactive transcripts on the mobile version of TED.com in the same way as above. ![]()
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