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<p>This paper reassesses the Taylor curve-the trade-off between inflation and output-gap volatility—as a metric of U.S. monetary policy efficiency from 1960 to 2024. Unlike previous studies that rely primarily on the Hodrick–Prescott filter, the analysis systematically compares multiple output-gap estimation methods, including the Christiano–Fitzgerald filter, Beveridge–Nelson and Blanchard–Quah decompositions, and Hamilton’s regression-based approach. Conditional volatilities are obtained from GARCH models, and a time-varying parameter framework is used to trace the evolution of the Taylor-curve trade-off coefficient. The results show that assessments of policy efficiency are highly sensitive to the choice of filter: the share of monetary policy periods classified as inefficient varies substantially across methods, and pairwise association statistics indicate only moderate agreement among filters. Several patterns noted in earlier work, particularly Olson et&#xa0;al. (<CitationRef CitationID="CR28">2012</CitationRef>), also appear in this extended sample, including relatively weak policy performance in the early 1990&#xa0;s and a marked deterioration during the housing boom. Extending the sample beyond 2012 reveals renewed inefficiency during the COVID-19 pandemic, suggesting that recent monetary policy has not fully regained the effectiveness observed in earlier stable periods.</p>

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The taylor curve revisited: filter choice and the evaluation of U.S. monetary policy

  • 期刊论文

  • 发表日期：

    2026年1月9日

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  • Dominik Kavřík

摘要

This paper reassesses the Taylor curve-the trade-off between inflation and output-gap volatility—as a metric of U.S. monetary policy efficiency from 1960 to 2024. Unlike previous studies that rely primarily on the Hodrick–Prescott filter, the analysis systematically compares multiple output-gap estimation methods, including the Christiano–Fitzgerald filter, Beveridge–Nelson and Blanchard–Quah decompositions, and Hamilton’s regression-based approach. Conditional volatilities are obtained from GARCH models, and a time-varying parameter framework is used to trace the evolution of the Taylor-curve trade-off coefficient. The results show that assessments of policy efficiency are highly sensitive to the choice of filter: the share of monetary policy periods classified as inefficient varies substantially across methods, and pairwise association statistics indicate only moderate agreement among filters. Several patterns noted in earlier work, particularly Olson et al. (2012), also appear in this extended sample, including relatively weak policy performance in the early 1990 s and a marked deterioration during the housing boom. Extending the sample beyond 2012 reveals renewed inefficiency during the COVID-19 pandemic, suggesting that recent monetary policy has not fully regained the effectiveness observed in earlier stable periods.