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The Taylor rule

Taylor's 1993 rule sets the policy rate from inflation $\pi_t$ and the output gap $x_t$ (Taylor, 1993):

$$i_t = r^* + \pi_t + 0.5\,(\pi_t - \pi^*) + 0.5\,x_t$$
taylor-rulemonetary-policy 5 cards Monetary Policy Rules

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