The Taylor principle seems likely to be a feature of any good monetary policy and thus provides an important guidepost for policymakers. 5  For example, one proposal would have the Federal Reserve adjust the growth of the monetary base in response to current macroeconomic conditions (McCallum, 1988).
In addition, price and wage changes below the euro area average imply that the competitiveness of the country would increase vis-à-vis the other regions and, as a result, that external demand would also contribute to closing the gap between actual and potential output.