"It is easy to confuse what is with what ought to be, especially when what is has worked out in your favor."
- Tyrion Lannister

"Lannister. Baratheon. Stark. Tyrell. They're all just spokes on a wheel. This one's on top, then that's ones on top and on and on it spins, crushing those on the ground. I'm not going to stop the wheel. I'm going to break the wheel."

- Daenerys Targaryen

"The Lord of Light wants his enemies burned. The Drowned God wants them drowned. Why are all the gods such vicious cunts? Where's the God of Tits and Wine?"

- Tyrion Lannister

"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."

- Jorah Mormont

"These bad people are what I'm good at. Out talking them. Out thinking them."

- Tyrion Lannister

"What happened? I think fundamentals were trumped by mechanics and, to a lesser extent, by demographics."

- Michael Barone

"If you want to know what God thinks of money, just look at the people he gave it to."
- Dorothy Parker

Sunday, November 03, 2013


Adjusting the Taylor Rule for the Unemployment Rate Bias by Jared Bernstein
There are various different rules and techniques for estimating the optimal FFR (Federal Funds Rate), but John Taylor’s rule is probably the most common.*

*Janet Yellen’s recent “optimal control” work is also gaining prominence in this space.  By simulating a path toward a goal like full employment, optimal control techniques return both a path for the FFR and inflation (other variables could easily be included but these are the key ones).

See the figures on pages 28-30 from this Yellen paper.  Relative to various Taylor rules, the technique allows inflation to temporarily exceed the target rate (2%) as the unemployment rate falls (I should note that optimal control assumes inflation expectations remain well-anchored, an assumption that will produce agita for some price hawks).
 agita - heartburn

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