<p>$i_t$ should be the interest rate at time $t$. $\pi_t$ the inflation at time $t$. $Y_t$ the income at time $t$. The variables without indices are the targets of the central bank. The interpretation of this Taylor rule is therefore that the current interest rate is a function of the past deviation of the interest rate from the target, the current inflation deviation from target, the current output gap, the exchange rate deviation from target, and deviations from the current money growth target.</p>

CC BY-SA 3.0
2015-11-11T08:49:10.007Z
2015-11-11T08:49:10.007Z
HRSE
<p>I need a bit of help interpreting this version of the Taylor rule I stumbled across recently: </p>

<p>$$\ln\frac{1+i_t}{1+i} = X_i \ln\frac{1+i_{t-1}}{1+i}+X_{\pi}\ln\frac{\pi_t}{\pi}+X_y \ln\frac{Y_t}{Y}+X_s \ln\frac{S_t}{S}+X_{\theta}\ln\frac{{\theta_t}}{\theta}$$</p>

<p>I think that S is the exchange rate and theta is a money growth factor. Other than that, I am not very sure. I am hoping this uses some standard notation so that anyone here more familiar with economics research might be able to give me more thorough understanding of what is happening here. </p>

CC BY-SA 3.0
2017-03-06T14:51:53.240Z
This is not the canonical version of the Taylor rule so the headline is a bit misleading. Do you want to understand how to interpret the Taylor rule or how to interpret the rule you show? And are you looking to understand why it looks the way it does, why it has the coefficients it does, what it means to follow such a rule, or something else entirely?
BKay
CC BY-SA 3.0
2015-03-11T23:22:58.503Z
Can you provide the link, or the reference, in which you found the above?
Alecos Papadopoulos
<macroeconomics>
Help interpreting a Taylor rule
notnotcorrect
# Help interpreting a Taylor rule

(Asked by: username_0 on 2015-03-11)

I need a bit of help interpreting this version of the Taylor rule I stumbled across recently:

$$\ln\frac{1+i\_t}{1+i} = X\_i \ln\frac{1+i\_{t-1}}{1+i}+X\_{\pi}\ln\frac{\pi\_t}{\pi}+X\_y \ln\frac{Y\_t}{Y}+X\_s \ln\frac{S\_t}{S}+X\_{\theta}\ln\frac{{\theta\_t}}{\theta}$$

I think that S is the exchange rate and theta is a money growth factor. Other than that, I am not very sure. I am hoping this uses some standard notation so that anyone here more familiar with economics research might be able to give me more thorough understanding of what is happening here.

**Tags:** macroeconomics

> **Comments:**
> **username_2**: Can you provide the link, or the reference, in which you found the above?  
> **username_1**: This is not the canonical version of the Taylor rule so the headline is a bit misleading. Do you want to understand how to interpret the Taylor rule or how to interpret the rule you show? And are you looking to understand why it looks the way it does, why it has the coefficients it does, what it means to follow such a rule, or something else entirely?  

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## 1 answers

### Answer by username_3 on 2015-11-11. Score: 1

$i\_t$ should be the interest rate at time $t$. $\pi\_t$ the inflation at time $t$. $Y\_t$ the income at time $t$. The variables without indices are the targets of the central bank. The interpretation of this Taylor rule is therefore that the current interest rate is a function of the past deviation of the interest rate from the target, the current inflation deviation from target, the current output gap, the exchange rate deviation from target, and deviations from the current money growth target.


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