Publication

This paper examines the applicability of the Taylor rule using a real-time data set for German GDP between 1973 and 1998. The authors calculate various measures of real-time output gaps and use these to calibrate and estimate Taylor-rule reaction functions for the Bundesbank. Most of the functions fit the Bundesbank's actual policy quite well. The authors find that the reaction coefficients resemble quite closely those originally proposed by Taylor for some of the real-time measures of the output gap and hold that their results give support to the use of the Taylor rule for monetary policy.