And it was right under my nose this whole time. Fellow Grad student at UCD and job market candidate, Takeshi Yagihashi, estimated a Taylor rule with credit channel variables. He finds that the Fed seems to care about credit channel efficiency more than the output gap when making policy and he finds interest rate smoothing isn’t that big a concern ((I have a hard time believing the Fed doesn’t care about smoothing… why does it move in such small increments even when everyone knows its going to move more in the future? why not all at once?)).
And of course I studied credit channel models last year, the deficiency is in me not the theory or the UCD monetary curriculum. I just didn’t “get” the policy implications of those models.
AND guess who wrote the papers that give the theoretical underpinnings for the rules Takeshi estimated? I’ll give you one guess. Hint: he has a beard and he has to worry about credit channel problems.