The U.S. Bureau of Economic Analysis (BEA) constructs the index. Download a spreadsheet of these release dates. One of the nicer versions available is on the Cleveland Fed's Simple Monetary Policy Rules web page. One should keep in mind that the ZLB can impact the prescriptions of rules with a large amount of interest-rate smoothing (for example, r close to 1.0 in the Taylor Rule Utility). Set the order of the Taylor polynomial 3. Quarterly averages of r* are used in the Taylor Rule Utility. A GDP gap is also used in the default setting for the "Alternative 3" line of the Taylor Rule Utility chart, with the Congressional Budget Office's (CBO) estimate of potential real GDP as the measure of the trend. In John Taylor's 1993 paper introducing the Taylor rule, the intercept was calibrated at 2 percent. Change the function definition 2. Holston-Laubach-Williams model 1-sided estimate For example, users who want to implement the Taylor (1993) rule with the unemployment gap and Okun's original conversion factor should set the weight on the gap equal to 0.75 = (3.0/2.0)*0.5. What is the heatmap? For example, the Taylor Rule Utility does not include inflation measures based on the Consumer Price Index or the GDP deflator. How does the Atlanta Fed's Taylor Rule Utility differ from similar tools? These estimates will differ from the aforementioned one-sided estimates computed with the latest data vintage because of revisions to the source data and changes in the model's estimated parameter values. Twice unemployment rate gap, BOG model, 2-sided estimate Enter your email address to subscribe to this blog and receive notifications of new posts by email. The SPF natural rate estimates are collected in the third quarter of each year. For the release date of the CBO's last estimate of potential real GDP, we calculate what the output gap was using the BEA's latest estimate of real GDP at the time of the CBO release. It will sometimes be the case that there are both red and green shaded cells in the heatmap. These estimates are assigned to the third quarter of their survey year and linearly interpolated to fill in estimates for other quarters besides the third. Set heatmap For recent months covered by the Taylor Rule Utility where an estimate of the longer-run unemployment rate is not yet available, it is assumed that the longer-run rate remains at the same reading from the most recent SEP. Quarterly averages of the actual, interpolated, and extended longer-run unemployment rate projections are used for the unemployment rate gap calculations in the Taylor Rule Utility. Projections of PCE and core PCE inflation for the most recent quarter are constructed using forecasts from the Federal Reserve Bank of Cleveland's Inflation Nowcasting website. For months in which they are not available, rates implied by last price quotes from 30-day federal funds futures contracts on the Chicago Mercantile Exchange website are used. 2.) estimate) The alternative inflation target option for the Taylor Rule Utility is the midpoint of the central tendency of the FOMC meeting participants' longer-run inflation projections for the price index for personal consumption expenditures (PCE). The unemployment gap is proxied in this rule by the negative of the difference between the (quarterly) unemployment rate and the midpoint of the central tendency of the FOMC meeting participants' longer-run projections of it. The default setting uses the BEA's most recent vintage of the core PCE price index. The source data for the Fleischman and Roberts' model are revised and/or extended to the most recent quarter used for the Taylor Rule Utility by using the most recently released data from the original sources (the BEA, the U.S. Bureau of Labor Statistics, and others) and our own calculations. A third measure of the unemployment gap is derived from the midpoint of the central tendency of the FOMC meeting participants' longer-run unemployment rate projections that are published in the Summary of Economic Projections (SEP).The midpoint projections are assigned to the month of the FOMC meeting and linearly interpolated to assign values for months without FOMC projections. For the default settings of the "Alternative 1" and "Alternative 2" lines in the Taylor Rule Utility chart, the implied estimates of r* are constructed with the median of the FOMC meeting participants' longer-run projections of the federal funds rate. A measure of expected PCE inflation from the Federal Reserve Bank of Philadelphia's Survey of Professional Forecasters (SPF) can also be chosen as the inflation measure. In the chart version, users can plot prescriptions for up to three rules. The source data used for the Taylor Rule Utility are available here. Apart from the 2008 to 2014 period, the CBO's estimates of the "underlying long-term rate of unemployment" and the natural rate of unemployment are identical. This article raises questions about whether a combination of the Taylor rule with such models offers a useful The Taylor Rule Utility allows users to display prescriptions from alternative Taylor rules using either a time series chart, or a so-called heatmap. This became the standard value used in many subsequent implementations of the rule. Users can also choose real-time measures of PCE and core PCE inflation—the observed published values of inflation policymakers would have seen at past FOMC meetings—for the Taylor Rule Utility. The default option for the Taylor Rule Utility chart and heatmap is a 2 percent inflation target for the current and previous quarters. Survey of Professional Forecasters expected 4-quarter PCE inflation 3.) Taylor noted in his paper that his choice was close to the 2.2 percent trend growth rate of real GDP from 1984:Q1 to 1992:Q3 estimated at the time of his writing. Whenever the SPF natural rate is not available for one or more recent quarters, we assume that natural rate remains at its last estimate from the survey.