McCallum Rule

See: Taylor's Rule.

There’s an economic crisis, you say? Forget Taylor's rule. Bring in the big guns: the McCallum rule.

The McCallum rule, like Taylor's rule, is a guideline for how central banks should respond to change. The McCallum rule says that central banks should try to hit a target monetary base (think: how much money is floating around in the economy, allowing those economic cogs to turn). The target monetary base is based on a balancing formula that takes inflation and other factors into account, as a nominal GDP targeting rule.

The McCallum rule is a known better option to Taylor's rule when the economy is up in flames. Everything is fine. When the economy takes a dive, the McCallum rule formula will tell the central bank what their target monetary base should be, determining to what degree they should intervene with the money supply or interest rates.