John Taylor on Monetary Policy

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4.7 • 4.4K Ratings

🗓️ 18 August 2008

⏱️ 55 minutes

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Summary

John Taylor of Stanford University talks about the Taylor Rule, his description of what the Fed ought to do and what it sometimes actually does, to keep inflation in check and the economy on a steady path. He argues that when the Fed has deviated from the Rule in recent years, the economy has performed poorly. Taylor also assesses the chances for a monetary or financial disaster and the Fed's recent expanded role in intervening in financial markets.

Transcript

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0:00.0	Welcome to Econ Talk, part of the Library of Economics and Liberty.
0:12.5	I'm your host Russ Roberts of George Mason University and Stanford University's Hoover
0:17.3	Institution.
0:18.7	Our website is econtalk.org, where you can subscribe, find other episodes, comment on this podcast,
0:25.8	and find links to other information related to today's conversation.
0:29.9	Our email address is mail at econtalk.org, we'd love to hear from you.
0:38.3	My guest today is John Taylor, the Mary and Robert Raymond Professor of Economics at Stanford
0:43.5	University, and the Bowen Age and Janis Arthur McCoy Senior Fellow at the Hoover Institution.
0:48.9	John, welcome to Econ Talk.
0:50.9	Great to be here.
0:51.9	John, I think most Americans see the Federal Reserve as a deeply mysterious and at times
0:56.3	threatening institution.
0:58.6	What should an educated person understand about what the Fed is actually doing and trying
1:02.7	to do?
1:03.7	It's main mission now is to keep the purchasing power of the dollar stable, if you like,
1:11.8	to prevent inflation, to make sure we don't have a great depression again to make sure
1:17.8	we don't have high inflation rates like we had in the 70s to keep the economy on an even
1:22.0	keel, mainly by keeping inflation rate low.
1:25.1	That's its primary objective.
1:27.6	When it was set up in 1914, it's evolved over time, probably wouldn't set up exactly
1:33.5	that way if you had to do it from scratch, but that's the institution and that's what
1:37.6	its mission is.
	...

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