Taylor Rules, Long-Run Growth and Real Uncertainty

We study the effects of real uncertainty on long-run growth under different Taylor-type rules. We fi…nd a non-negligible relationship between real uncertainty and growth, which depends on the source of real uncertainty as well as the type of the Taylor rule considered. Importantly, when uncertainty is due to investment speci…fic shocks, it is highly detrimental for growth, unless the Central Bank follows a strong inflation targeting rule. Furthermore, we fi…nd that in the presence of real uncertainty, there is a positive correlation between average growth and average inflation under pure inflation targeting regimes and negative otherwise.