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Monetary economics is the branch of economics that studies the nature, role, and impact of money and monetary institutions. It provides a framework for analyzing money and its core functions—as a medium of exchange, a store of value, and a unit of account—and examines how money can achieve widespread acceptance, including through its role as a public good.

The Taylor rule is a monetary policy targeting rule. The rule was proposed in 1992 by American economist John B. Taylor for central banks to use to stabilize economic activity by appropriately setting short-term interest rates. The rule considers the federal funds rate, the price level and changes in real income. The Taylor rule computes the optimal federal funds rate based on the gap be