S/E/15. Monetary Rules (The Taylor Rule) and the conduct of monetary policy

This essay will attempt to tackle the question of monetary rules. Should these be used? And if so, how closely should they be followed. The Bank of England, like the Federal Reserve, is an institution where members are invited to use their expert judgement in a vote on the conduct of monetary policy. This essay, by focusing on the Taylor rule, will describe how monetary rules function; and will provide an insight on why the BOE and the Federal Reserve still have a monetary committee that votes on monetary policy, rather than simply substituting parameters into a pre-determined system of monetary equations.