Macro Musings with David Beckworth Jon Hartley on the Legacy of John Taylor and his New Measure of R-Star
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Sep 29, 2025 Join Jon Hartley, a macroeconomist and scholar at the Mercatus Center, as he dives into the legacy of economist John Taylor and his pivotal contributions to monetary policy. Hartley discusses the recent Hoover Monetary Conference, the impact of the Taylor Rule, and why central banks should adopt his new measure of R-star. He also analyzes the U.S. Treasury's shift towards short-term debt management and explores the implications for government interest costs and fiscal resilience. A fascinating exploration of macroeconomic insights!
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Taylor's Foundational Impact
- John Taylor shaped modern monetary thought through the Taylor Rule and early New Keynesian sticky-price models.
- His empirical and policy engagement amplified those ideas into global central-bank practice.
Why The Taylor Rule Endured
- The 1993 Taylor Rule compactly links interest rates to inflation and the output gap while enabling equilibrium determinacy.
- Its simplicity and theoretical benefits explain why it became central in describing central-bank reaction functions.
Early Contribution To New Keynesianism
- Taylor's 1980 staggered-contracts work anticipated New Keynesian approaches to monetary non-neutrality.
- It provided a concrete friction—fixed-timing contracts—allowing monetary policy to have real effects in DSGE models.
