‘Is the Taylor Rule the same as the Friedman Rule?’z

Our objective in this paper has been to provide more theoretically coherent microfoundations for monetary policy rules in response to Lucas’s (1976) critique of econometric policy evaluation and, more importantly, to show that the Taylor rule can be derived via Friedman’s k% money supply rule. A key di¤erence with respect to the traditional IS-LM framework, is that, the aggregate decision rules evolve explicitly from optimisation by households and ...rms. We conduct counterfactual historical analysis to compare and contrast Friedman’s rule alongside Taylor’s (1993) rule. JEL classi...cations : D5, D58, E0, E5