Does the Federal Reserve Follow a Non-Linear Taylor Rule?

The Taylor rule has become one of the most studied strategies for monetary policy. Yet, little is known whether the Federal Reserve follows a non-linear Taylor rule. This paper employs the smooth transition regression model and asks the question: does the Federal Reserve change its policy-rule according to the level of inflation and/or the output gap? I find that the Federal Reserve does follow a non-linear Taylor rule and, more importantly, that the Federal Reserve followed a non-linear Taylor rule during the golden era of monetary policy, 1985-2005, and a linear Taylor rule throughout the dark age of monetary policy, 1960-1979. Thus, good monetary policy is associated with a non-linear Taylor rule: once inflation approaches a certain threshold, the Federal Reserve adjusts its policy-rule and begins to respond more forcefully to inflation.

Charlotte Wolter als Jane Eyre, Rollenbild, in: Charlotte Birch-Pfeiffer: Die Waise aus Lowood, Wien: Burgtheater

Signatur des Originals: S 36/F02186

Peter Benoît, Brustbild, Profil, 1865

Signatur des Originals: S 36/F02988

Peter Benoît, Brustbild, Profil, 1865

Signatur des Originals: S 36/F02989

Sarah Jane Walker, Kniestück

Signatur des Originals: S 36/F03308

Sarah Jane Walker, Hüftbild

Signatur des Originals: S 36/F03309

Sarah Jane Walker, Rollenbild, Brustbild

Signatur des Originals: S 36/F03310

Jane Henriot, Hüftbild, Théatre Français

Signatur des Originals: S 36/F04436

Erinnerung aus dem Leben König Ludwig II. von Bayern : Das Lohengrinfest auf dem Alpsee (24. Aug. 1865 Nachts.)

Signatur des Originals: S 36/F07042

Erinnerung aus dem Leben König Ludwig II. von Bayern : Das Lohengrinfest auf dem Alpsee (24. Aug. 1865 Nachts.)

Signatur des Originals: S 36/F07043

Jane Fierny, Kniestück, Profil

Signatur des Originals: S 36/F08556

Jane Gay, Rollenbild, Brustbild, Profil

Signatur des Originals: S 36/F08625

Jane Horwitz, Rollenbild, Kniestück

Signatur des Originals: S 36/F08860

Jane Horwitz, Rollenbild, Brustbild

Signatur des Originals: S 36/F08861