Taylor Curve Research Articles

Financial development: Is it an advantage or obstacle for monetary policy?

PurposeThe objective of this study is to assess the impact of financial development (FD) on monetary policy efficiency (MPE) in developed G7 countries in the period 1980–2017, based on data availability.Design/methodology/approachThis study followed a two-step process as follows: (1) using the Monte Carlo simulation based on Taylor curve theory to build the MPE measure and (2) evaluating the effect of FD on MPE by feasible generalized least squares (FGLS) estimation.FindingsThe results of this study show that (1) MPE varies over time. Monetary policy appears ineffective during the crisis period and is subject to many impacts of domestic and external shocks. On the contrary, the ability to influence the economy to achieve the central bank's goal tends to increase in the recovery stages, and this is in line with the actual. (2) FD has a negative impact on MPE. Interestingly, when considering the role of component FD indicators, the development of financial markets (FMs) has a negative impact on MPE while the development of financial institutions (FIs) has a positive impact. In particular, the impact of FI on MPE is mainly attributed to the impact of the depth of FI. Meanwhile, the impact of FM on MPE is mainly due to the impact of the efficiency in the FM.Originality/valueTo the author’s knowledge, this is the first study that evaluates the impact of FD on MPE in the context of measuring MPE by using the Taylor curve theory. Results from this study suggest a scientific and practical MPE measure and provide significant policy implications. This paper also offers suggestions for future research.

Vibration-based tool life monitoring for ceramics micro-cutting under various toolpath strategies

The 21st century manufacturing technology is unimagined without the various CAM (Computer Aided Manufacturing) toolpath generation programs. The aims of developing the toolpath strategies which are offered by the cutting control software is to ensure the longest possible tool lifetime and high efficiency of the cutting method. In this paper, the goal is to compare the efficiency of the 3 types of tool path strategies in the very special field of micro-milling of ceramic materials. The dimensional distortion of the manufactured geometries served to draw the Taylor curve for describing the wearing progress of the cutting tool helping to determine the worn-in, normal and wear out stages. These isolations allow to separate the connected high-frequency vibration measurements as well. Applying the novel feature selection technique of the authors, the basis for the vibration based micro-milling tool condition monitoring for ceramics cutting is presented for different toolpath strategies. It resulted in the identification of the most relevant vibration signal features and the presentation of the identified and automatically separated tool wearing stages as well.

The Taylor curve: international evidence

ABSTRACT We use the Taylor curve to gauge deviations of monetary policy from an efficiency locus for the United Kingdom (UK) and the four largest economies of the Eurozone (Germany, France, Italy, Spain) for the period 2000–2018. For this purpose, we use shadow interest rates, which is a common metric for both conventional and unconventional monetary policies, and the newly proposed Hamilton-filter to measure output gap, which improves upon the drawbacks of the traditionally used Hodrick–Prescott filter. Our findings suggest that deviations in the UK mostly occurred amid the global financial crisis and the post-Brexit period, whereas Eurozone members experienced more volatile deviations around 2001, during the global financial crisis and the Eurozone sovereign debt crisis.

An evaluation of ECB policy in the Euro's big four

The Taylor curve can be viewed as an efficiency frontier displaying the trade-off between the volatility of output and volatility of inflation. We build on the existing literature in this area and view Taylor curves as a lens through which to gauge the deviations of actual ECB policy from the optimum. We employ data over the period 1999-2013 period to measure the orthogonal distance of the observed volatilities from the Taylor curve in Germany, France, Italy, Spain, and the Euro area using a recursive VARs. We find that the distance has substantially increased in all four countries suggesting that monetary policy has become less efficacious for Germany, France, Italy, and Spain since the financial crisis in 2007-2008. We also estimate counterfactual Taylor rules and find that a simple Taylor rule would have only substantially improved monetary policy efficacy in Germany.

Asset price and monetary policy: the effect of expectations formation

This article studies the stabilization effect of monetary policy reacting to asset price, accounting for the expectations formation effect of policy regime shift, in a DSGE model calibrated to the US economy. In contrast to the linear policy rule that generates negligible stabilization effect from responding to asset prices, the regime switching policy rule can significantly stabilize inflation-output volatilities. We then identify the range of parameter values that can generate stabilization effect for inflation and find that reacting to asset prices too aggressively can be inflation de-stabilizing. Given certain combinations of parameter values, the trade-off between the expected volatility of inflation and that of output, as demonstrated by the Taylor curve, substantially diminishes, thus considering non-linear policy rule expands the set of monetary policy choices available for monetary authority. Finally, there exists an optimal responsiveness to asset prices.

A Simple Empirical Measure of Central Banks' Conservatism

In this article we suggest a simple empirical and model‐independent measure of Central Banks' Conservatism based on the Taylor curve. This new indicator can easily be extended in time and space, whatever the underlying monetary regime of the countries considered. We demonstrate that our measure evolves in accordance with the monetary experiences of 32 OECD member countries from 1980 and is largely equivalent to the model‐based measure provided by for the post‐1985 period. We finally present the relevance of such an indicator for further empirical analysis addressing the preferences of Central Banks.

A Simple Empirical Measure of Central Banks' Conservatism

In this paper we suggest a simple empirical and model-independent measure of Central Banks' Conservatism, based on the Taylor curve. This new indicator can easily be extended in time and space, whatever the underlying monetary regime of the considered countries. We demonstrate that it evolves in accordance with the monetary experiences of 32 OECD member countries from 1980, and is largely equivalent to the model-based measure provided by Krause & Mendez [Southern Economic Journal, 2005]. We finally bring forward the interest of such an indicator for further empirical analysis dealing with the preferences of Central Banks.

La dicotomía clásica y la política monetaria moderna

This paper describes the issue of the Phillips curve under a treatment that leads to the Taylor curve and its general implications. The first section deals with the Samuelson-Solow vs. Friedman-Phelps discussion and the “closing” Lucas-Sargent-Taylor; the second is devoted to the theory of inflation and stabilization and the third review the nontechnical foundations culminating in the Taylor curve and the Taylor trinity. Finally some conclusions are obtained.

Les cibleurs d'inflation sont-ils monomaniaques ?

Cet article vise à déterminer si le ciblage d’inflation implique en pratique un plus fort degré de conservatisme que les autres régimes de politique monétaire. Nous utilisons un indicateur original de conservatisme fondé sur la courbe de Taylor, et recourons à la méthode d’appariement par score de propension. Les résultats indiquent que les cibleurs d’inflation on, en effet, une préférence relative pour la stabilisation de l’inflation significativement plus grande que les non-cibleurs. Ce résultat conduit à s’interroger sur l’opportunité de cette stratégie, alors que la crise financière a montré que la stabilité des prix n’est pas suffisante pour garantir la stabilité macroéconomique et financière.

A Historical Analysis of the Taylor Curve

Taylor (1979) shows that there is a permanent trade‐off between the volatilities of the output gap and inflation. Although a number of papers argue that the so‐called Taylor curve is a policy menu, we use it as an efficiency locus to gauge the appropriateness of monetary policy. We examine the efficiency of U.S. monetary policy from 1875 onward by measuring the orthogonal distance between the observed volatilities of the output gap and inflation from the Taylor curve. We also identify time periods in which the variability of the U.S. economy changed by observing shifts in this efficiency frontier.

Wear Monitoring of Connecting Rod Bearing via Air-Borne Method Analyzed by Using I-Kaz<sup>TM</sup> Multi Level Value

Different techniques have been developed in the area of bearing wear monitoring. This paper proposes a different experimental study on bearing wear monitoring by using an airborne technique. The data captured in the airborne technique will be analyzed by using I-kazTM Multi Level (7Z) coefficient and then will be correlated with the conventional specific wear rates, K. The wear tests were carried out by using a pin-on-disc configuration at a sliding speed of 7.85 m/s. A set of sliding distance ranging from 20 160 km at a fixed load of 200 N was utilized and the K value was measured at every interval of 20 km for the speed. SAE40 type lubricant was used in the test to simulate the actual operation of the connecting rod bearing. The audio range frequency below 20 kHz in the airborne technique was obtained through a microphone 40SC type which was placed 10 mm from the pin-disc contact. The analysis result showed that the wear rate, K increased from 1.82 to 6.70x10-8 mm3/Nm as the sliding distance increased, indicating that a mild-abrasion wear regime had occurred. The curve fitting of K as a function of I-kazTM Multi Level coefficient showed a similarity to an established of Taylor Tool Life curve. Thus, it was possible to correlate the Taylor curve and worn bearing, mainly in monitoring and identifying the bearing condition with respect to the sliding distance. The trend of I-kazTM Multi Level coefficient was found to be consistent with the increase of sliding distance which indicates that the I-kazTM Multi Level value can positively be used as wear response indicator for bearing.

An empirical investigation of the Taylor curve

Taylor (1979) posited that a central bank faces a tradeoff between the volatility of the output gap and volatility of inflation; this trade-off has become known as the Taylor curve. Thus, the Taylor curve necessitates that the correlation between the volatilities of inflation and the output gap be non-positive for optimal monetary policy. Friedman (2006) challenged Chatterjee (2002) and Taylor’s (2006) view that the Taylor curve may be used as a policy menu from which the central bank may choose the level of inflation and output gap volatilities. To better understand the issue, we take an in depth look at the correlation between the second moments of inflation and the output gap through the lens of the Taylor curve. Our results reveal that macroeconomic performance is superior in time periods in which the Taylor curve relationship holds.

Wear Monitoring of Connecting Rod Bearing via Air-Borne Method Analyzed by Using I-Kaz<sup>TM</sup> Multi Level Value

Different techniques have been developed in the area of bearing wear monitoring. This paper proposes a different experimental study on bearing wear monitoring by using an airborne technique. The data captured in the airborne technique will be analyzed by using I-kazTM Multi Level (7Z) coefficient and then will be correlated with the conventional specific wear rates, K. The wear tests were carried out by using a pin-on-disc configuration at a sliding speed of 7.85 m/s. A set of sliding distance ranging from 20 160 km at a fixed load of 200 N was utilized and the K value was measured at every interval of 20 km for the speed. SAE40 type lubricant was used in the test to simulate the actual operation of the connecting rod bearing. The audio range frequency below 20 kHz in the airborne technique was obtained through a microphone 40SC type which was placed 10 mm from the pin-disc contact. The analysis result showed that the wear rate, K increased from 1.82 to 6.70x10-8 mm3/Nm as the sliding distance increased, indicating that a mild-abrasion wear regime had occurred. The curve fitting of K as a function of I-kazTM Multi Level coefficient showed a similarity to an established of Taylor Tool Life curve. Thus, it was possible to correlate the Taylor curve and worn bearing, mainly in monitoring and identifying the bearing condition with respect to the sliding distance. The trend of I-kazTM Multi Level coefficient was found to be consistent with the increase of sliding distance which indicates that the I-kazTM Multi Level value can positively be used as wear response indicator for bearing.

Evaluating Monetary Policy

Evaluating inflation-targeting monetary policy is more complicated than checking whether inflation has been on target, because inflation control is imperfect and flexible inflation targeting means that deviations from target may be deliberate in order to stabilize the real economy. A modified Taylor curve, the forecast Taylor curve, showing the tradeoff between the variability of the inflation-gap and output-gap forecasts can be used to evaluate policy ex ante, that is, taking into account the information available at the time of the policy decisions, and even evaluate policy in real time. In particular, by plotting mean squared gaps of inflation and output-gap forecasts for alternative policy-rate paths, it may be examined whether policy has achieved an efficient stabilization of both inflation and the real economy and what relative weight on the stability of inflation and the real economy has effectively been applied. Ex ante evaluation may be more relevant than evaluation ex post, after the fact. Publication of the interest-rate path also allows the evaluation of its credibility and the effectiveness of the implementation of monetary policy.

Monetary Policy Switch, the Taylor Curve, and the Great Moderation

This paper employs a standard new Keynesian model to compute the inflation/output volatility frontier, i.e. the Taylor curve. We find that under indeterminacy the tighter is the monetary policy, the higher is the inflation/output gap volatility. This is due to impact of systematic monetary policy on inflation and output persistence in the model. In fact, under indeterminacy a more aggressive monetary policy causes an increase in inflation persistence, and augments its volatility .T he effects on output tend to be of opposite sign. When moving to ’active’ monetary policies the degrees of inflation and output persistence in the model drop remarkably. This finding is robust to different parameterizations of the DSGE new-Keynesian monetary model employed. This result i) offers support to the move from ’passive’ to ’active’ monetary policy as one of the possible rationales for the Great Moderation, ii) underlines the need of a deeper understanding of the link between systematic monetary policy and macroeconomic persistence, and iii) warns against subsamples pooling when performing macroeconometric analysis.

Empirical Investigations of Inflation Targeting

A growing number of countries have anchored their monetary policy to an explicit numerical rate or range of inflation since such an inflation targeting framework was first adopted by New Zealand in 1989. This paper empirically investigates issues associated with inflation targeting using a dataset of 66 countries for the 1980-2000 period. The paper focuses on two issues. First, which factors are systematically associated with a country's decision to adopt inflation targeting as its monetary framework? Second, does inflation targeting improve the performance of inflation and output? Does the trade-off between inflation and output variability change under such a framework? The empirical results are informative and encouraging. A number of economic conditions, structure, and institution variables are significantly associated with the choice of inflation targeting. Both descriptive statistics and regression results suggest that inflation targeting does play a beneficial role in improving the performance of inflation and output. This paper explores an evident and positive relationship between inflation and output variability, which is different from the view based on the Taylor Curve. But the author finds limited support for the proposition that the adoption of inflation targeting improves the trade-off between inflation and output variability.

The Inflation-Output Variability Tradeoff and Monetary Policy: Evidence from a GARCH Model

This paper empirically investigates the Taylor curve volatility tradeoff in light of the stochastic behavior of the conditional variances of output and inflation. Stressing structural instability between periods before and after the 1979-1982 monetary policy regime change, I implement a bivariate generalized autoregressive conditional heteroskedasticity model to capture the output-inflation variability tradeoff and to explore the plausible impact of a change in the federal funds rate on the two conditional volatilities. I further evaluate the impacts of anticipated and unanticipated policy actions measured by two alternative policy reaction functions---one from a vector-autoregression-based reduced-form equation and another based on the Taylor rule. In addition to showing a volatility tradeoff relationship, the empirical model reveals different magnitudes of policy effects on output and inflation volatility across the two sample periods.

The Inflation‐Output Variability Tradeoff and Monetary Policy: Evidence from a GARCH Model

This paper empirically investigates the Taylor curve volatility tradeoff in light of the stochastic behavior of the conditional variances of output and inflation. Stressing structural instability between periods before and after the 1979‐1982 monetary policy regime change, I implement a bivariate generalized autoregressive conditional heteroskedasticity model to capture the output‐inflation variability tradeoff and to explore the plausible impact of a change in the federal funds rate on the two conditional volatilities. I further evaluate the impacts of anticipated and unanticipated policy actions measured by two alternative policy reaction functions—one from a vector‐autoregression‐based reduced‐form equation and another based on the Taylor rule. In addition to showing a volatility tradeoff relationship, the empirical model reveals different magnitudes of policy effects on output and inflation volatility across the two sample periods.

A new look at carbide tool life

The mechanical behaviour of WC-Co composites can be divided into three temperature domains. WC-Co is brittle below 500 °C, tough between 500 and 800 °C and shows plastic deformation above 800 °C. Once the tool temperature has been related to the cutting speed, the life of WC-Co cutting tools can be predicted based on the mechanical behaviour of WC-Co as a bulk material. As a result, the plot of the tool life as a function of speed also shows three domains of behaviour associated with the wear of the tool, due to brittle fracture, ductile fracture and plastic deformation. A model is presented to explain the observed behaviour of the tool life versus speed for continuous cutting (Taylor curve). This curve is generally non-linear on a log-log plot. The overall tool wear rate is generated by the superposition of a non-thermally activated process and two thermally activated ones. The interpretation of tool wear, based on three domains of temperature, also holds for interrupted cutting, such as milling. In this case, a qualitative model explains the brittle rupture observed below 500 °C, and the occurrence of comb cracks above 500 °C.

Comment on "Application of Computational Aerodynamics to Airplane Design"

which agrees with our curve shown in Fig. 1 of Payne's Comment. Note that this value is not below 1, as expected by Payne based on his assumption that the curve for an isosceles triangle is similar to Taylor's curve for a rhomboid. Nevertheless, these two curves do agree at 6 = 0 deg when both bodies reduce to a flat plate. Although additional published results cannot be found by us to check the validity of our curve at other 6 values, we believe that the agreement at 0 = 30 deg with the formula in Ref. 2 is not a coincidence, and the analysis based on which our curve was plotted is not in error. Analyses reveal that the added mass of an isosceles triangle behaves differently from that of a rhomboid, which is in contradiction to intuition. Figure 3 in Payne's Comment shows the behavior of a cavitating flat plate and a penetrating wedge having one and two wetted surfaces, respectively. Flows around them are not similar in nature to those around a triangle or a rhomboid having wetted surfaces all around. The close agreement of the two curves shown in Payne's Fig. 3 does not necessarily mean that the two curves in his Fig. 1 should also be in close agreement. We would like to thank Payne for his interest in our paper and his thorough review of literature concerning added mass theory, which corrects and complements our sketchy historical description on the related literature in aerodynamics only.