These changes in the economy make it difficult to accurately measure variables that are important determinants of the rules--such as potential output, the natural rate of unemployment, and the neutral real federal funds rate in the longer run--as well as to disentangle the effects of permanent and transitory changes on the economy.
Consequently, the FOMC examines a great deal of information to assess how realized and expected economic conditions are evolving relative to the objectives of maximum employment and 2 percent inflation.
As discussed in Challenges Associated with Using Rules to Make Monetary Policy , there are important limitations that argue against mechanically following any rule. Because the U. These differing views are reflected in the economics profession more generally and in alternative formulations of policy rules. As shown in figure 1, historical prescriptions from policy rules differ from one another and also differ from the actual level of the federal funds rate the black solid line.
The prescriptions of the inertial rule and the first-difference rule typically call for more gradual adjustments of the federal funds rate than the prescriptions from the Taylor rule and the balanced-approach rule.
Note: To calculate rule prescriptions, inflation is measured as the four-quarter log difference of the quarterly average of the price index for personal consumption expenditures excluding food and energy. For descriptions of the simple rules, see the text. Figure 1 also shows that all of the rules called for a significant reduction in the federal funds rate in , when the U.
In addition, all of the rules, except for the ELB-adjusted rule, called for values of the policy rate that were below the ELB in As the economy recovered and real GDP moved back toward its potential level, the prescriptions given by the Taylor and the balanced-approach rules rose and moved well above zero by However, the prescriptions of the inertial and first-difference rules increased more gradually in response to the improvement in economic conditions, and they remained persistently low for several years after The large discrepancies between the actual federal funds rate and the prescriptions given by the Taylor rule and the balanced-approach rule suggest that economic outcomes likely would have been significantly different had monetary policy followed one of these rules.
To address questions such as these, economists use models of the U. However, these models are invariably simplifications of reality, and there is no agreed-upon "best" model representation of the U. Without wide agreement on the metric for evaluating alternative policy rules, there remains considerable debate among economists regarding the merits and shortcomings of the various rules.
The Taylor rule was suggested in John B. The balanced-approach rule was analyzed in John B. Taylor, ed. A comprehensive review of policy rules is in John B. Taylor and John C. Friedman and Michael Woodford, eds. The same volume of the Handbook of Monetary Economics also discusses approaches other than policy rules for deriving policy rate prescriptions.
Return to text. Some foreign central banks have demonstrated that it is possible to make short-term interest rates modestly negative. For an articulation of the view that this rule is more consistent with following a balanced approach to promoting the Federal Open Market Committee's dual mandate than is the Taylor rule, see Janet L. This example assumes that the prescriptions of the balanced-approach and inertial rules for the federal funds rate do not incorporate feedback effects on the macroeconomy that influence the behavior of real GDP, unemployment, inflation, and other variables.
If the rule prescriptions did incorporate such feedback effects, then the macroeconomic outcomes could differ significantly over time between the two rules because these rules prescribe different interest rate paths in the near term. Authors William English, William Nelson, and Brian Sack discuss several reasons why policymakers may prefer to adjust rates sluggishly in response to economic conditions.
The authors emphasize that such a response may be optimal in the presence of uncertainty about the structure of the macroeconomy and the quality of contemporaneous data releases, as well as the fact that policymakers may be concerned that abrupt policy changes could have adverse effects on financial markets if those changes confused market participants. If your project is significant, it may warrant a full-scale meeting of policy makers and professionals.
A workshop format is particularly suitable for engaging stakeholders during the lifecycle of a project. At the end of a project, a press release, policy brief or report may be appropriate.
Online media e. Try to combine the two approaches. Leave short written briefs for policy makers to read after meetings, and follow up the dissemination of written material with personal contact. Here are some practical tips for these two methods: Meetings and workshops If you want to have a successful meeting with policy makers and other stakeholders, you need to get a sense of the kind of event most appropriate both to your work and your target audience.
For instance, Friday morning can be a good time for Whitehall, Wednesday night for Scottish Parliament, and before elections for civil servants. Many departments would be happy to host 'brown bag lunches' where academics can come and discuss the implications of their research.
Short meetings are best - half-day or less. Longer meetings may be possible but need to be worked out ahead of time. If having policy makers or professionals is key to your meeting, find out their schedules before you fix the date, time and length of the meeting. If you hold a day-long meeting, policy makers may only be able to attend for part of the day. State the audience benefit for the event in your promotional materials and introductory welcome on the day.
Why is this meeting, and your work, important for them? Focus on your key message and whatever background information your audience needs. A meeting should be a dialogue. Give stakeholders the chance to react, raise their concerns and provide their perspectives. A workshop format rather than presentations provides time for more interaction, although a briefing format may be suitable for shorter, smaller meetings e.
Be prepared to listen to the perspectives of policy makers and answer questions about the relevance and quality of your evidence. Policy makers are often intelligent consumers of evidence and have wide and varied knowledge, expertise and backgrounds. Their feedback and advice can improve the potential for impact and even the quality of your research. Take appropriate printed materials. For a one-on-one meeting, business cards and policy briefs are ideal, as are other short communications materials.
If you bring a report or journal article, include a one-page summary on top. Your institution or unit may be able to provide support for policy-oriented meetings, or you might consider setting up an event in an existing series , such as the ESRC Public Policy Seminar Series. Policy briefings There are a number of different terms for a policy brief, including briefing paper or report, briefing note, research briefing, etc.
Allow time for graphic design and printing if you require materials for a particular event. Professional printing is advisable if you have the budget, as your brief will be taken more seriously. Aim for words maximum for a 2-side brief. In general, include the following sections in order: Key points, Introduction, Findings, Policy Recommendations. State your aims clearly at the outset e. Spell out clearly and carefully why what you have found is important and different from what was known previously.
Think about your 'elevator pitch'. How would you persuade a key decision maker in the two minutes it takes to ride the elevator? Use bullet points for this where possible. Focus on your policy-relevant findings and recommendations. These should be highlighted, and take up most space. Keep it simple - a short brief is not the place for nuance. Learn more. Your contribution can help change lives. Donate now. Skip to main content.
Toggle navigation Navigation. Home » Learn A Skill » Toolkits » Influencing Policy Development. Outline Examples. State why a policy needs to be developed or modified, including: Basic needs are not being met e. Find out: The results of previous research about the issue or problem How similar issues have been resolved through policy decisions in other places or organizations What those who are affected by the issue think "should be" in an ideal situation What people believe is maintaining the problem, true or not List who or what is affected by the current state of affairs.
Ask: How are they affected? What broad goals do you need to achieve to be effective? Bring the issue to the attention of the public and decision makers and frame the issues and available policy options e.
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