TITLE:
Monetary Policy and Unemployment—A Study on the Relationship Exists in the United States
AUTHORS:
Yiyao Zhou
KEYWORDS:
Monetary Policy, Unemployment, Taylor’s Rule
JOURNAL NAME:
Open Journal of Social Sciences,
Vol.9 No.4,
April
26,
2021
ABSTRACT: This
paper intends to make research on the relationship between monetary policy and
unemployment of the United States from the first quarter of 1983 to the second
quarter of 2018. Data is collected and later divided into two groups, namely an
ex-crisis group and a post-crisis group, based on the event of the 2008 world
financial crisis. This paper uses an extended version of the original Taylor’s
rule by adding the concept of unemployment degree. The results suggest that in
both periods, the unemployment gap degree does make a positive impact on the
Fed interest rate and has a constantly significant impact on the Fed rate. As a
result, Central Banks should adopt an easy monetary policy to stimulate the
domestic economy from recession.