The Taylor Rule in Macroeconomic Theory

November 26 2025. This is an essay prepared for the upcoming Hoover Press volume, A Celebration Honoring John B. Taylor’s Contributions to Economics and Monetary Policy. The Taylor rule is key to a theory of inflation under interest rate targets. It stabilizes inflation in ISLM models, it destabilizes inflation to counter multiple equilibria in New-Keynesian models, and it smooths inflation in Fiscal Theory + New-Keynesian models. This is a profound illustration of the general finding that the Taylor rule does robustly well in very different models. The essay>