Between 2008 and 2009 NGDP fell at the fastest pace since the Great Depression. That suggests that monetary policy was probably too tight in 2008. Oddly, John Taylor seems to think money was too easy, unless I misinterpreted this passage:
A third policy response to the financial crisis was the sharp reduction in the federal funds rate in the first half year of the crisis. The federal funds rate target went from 5-1/4 percent when the crisis began in August 2007 to 2 percent in April 2008. The Taylor rule also called for a reduction in the interest rate during this early period, but not as sharp. Thus the reduction was more than would be called for using the historical relation stressed at the start of this paper, even adjusting for the Libor-OIS spread as I suggested  in a speech at the Federal Reserve Bank of San Francisco and in testimony at the House Financial Services Committee in February.
It is difficult to assess the full impact of this extra sharp easing, and more research is needed. The lower interest rates reduced the size of the re-set of adjustable rate mortgages and thereby was addressed to some of the fundamentals causing the crisis. Some of these effects would have occurred if the interest rate cuts were less aggressive.
The most noticeable effects at the time of the cut in the federal funds rate, however, were the sharp depreciation of the dollar and the very large rise in oil prices. During the first year of the financial crisis oil prices doubled from about $70 per barrel in August 2007 to over $140 in July 2008, before plummeting back down as expectations of world economic growth declined sharply. Figure 11 shows the close correlation between the federal funds rate and the price of oil during this period using monthly average data. The chart ends before the global slump in demand became evident and oil prices fell back.
When the federal funds rate was cut, oil prices broke out of the $60-$70 per barrel range and then rose rapidly throughout the first year of the financial crisis. Clearly this bout of high oil prices hit the economy hard as gasoline prices skyrocketed and automobile sales plummeted in the spring and summer of 2008. In my view, expressed in a paper  delivered at the Bank of Japan in May, this interest rate cut helped raise oil and other commodity prices and thereby prolonged the crisis.
Econometric evidence of the connection between interest rates and oil prices is found in existing empirical studies. For example, in early May 2008, the First Deputy Managing Director of the International Monetary Fund John Lipsky said: “Preliminary evidence suggests that low interest rates have a statistically significant impact on commodity prices, above and beyond the typical effect of increased demand. Exchange rate shifts also appear to influence commodity prices. For example, IMF estimates suggest that if the US dollar had remained at its 2002 peak through end-2007, oil prices would have been $25 a barrel lower and non-fuel commodity prices 12 percent lower.”
When it became clear in the fall of 2008 that the world economy was turning down sharply, oil prices then returned to the $60-$70 range. But by this time the damage of the high oil prices had been done.
Taylor mentions the big interest rate cut from August 2007 to April 2008. But during this period there was no increase in the monetary base, so the fall in rates represents less demand for money, not more supply. I can’t imagine why he would argue that money was too easy in 2008. Wouldn’t tighter money have led to an even bigger fall in NGDP between 2008 and 2009?
I’m also puzzled that someone would look at the price of oil when deciding whether money was too easy or too tight. Why not NGDP?