21 We can estimate a short-run, time-varying r* using a standard reduced-form IS (investment and saving) equation that relates the unemployment gap to its own lagged value and the lagged real interest rate gap.
We use the median of FOMC participants’  20 The SEP policy projections are for the midpoint of the federal funds rate target range at the end of a calendar year. The Taylor (1993) rule is defined as Rt = 2 + πt + 0.5(πt – 2) + 0.5Yt.