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Estimated Interest Rate Rules: Do they Determine Determinacy Properties?

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  • Jensen Henrik

    ()
    (University of Copenhagen)

Abstract

I demonstrate that econometric estimations of nominal interest rate rules may tell little, if anything, about an economy's determinacy properties. In particular, correct inference about the interest-rate response to inflation provides no information about determinacy. Instead, it could reveal whether optimal monetary policymaking is performed under discretion or commitment.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 11 (2011)
Issue (Month): 1 (May)
Pages: 1-22

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Handle: RePEc:bpj:bejmac:v:11:y:2011:i:1:n:11

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  1. Richard Clarida & Jordi Gali & Mark Gertler, 2002. "A Simple Framework for International Monetary Policy Analysis," NBER Working Papers 8870, National Bureau of Economic Research, Inc.
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  7. Lawrence J. Christiano & Christopher J. Gust, 1999. "Taylor rules in a limited participation model," Working Paper Series WP-99-3, Federal Reserve Bank of Chicago.
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  17. McCallum, Bennett T., 1981. "Price level determinacy with an interest rate policy rule and rational expectations," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 319-329.
  18. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
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Cited by:
  1. Aastrup, Morten & Jensen, Henrik, 2010. "What Drives the European Central Bank's Interest-Rate Changes?," CEPR Discussion Papers 8160, C.E.P.R. Discussion Papers.
  2. Blake, Andrew P., 2012. "Determining optimal monetary speed limits," Economics Letters, Elsevier, vol. 116(2), pages 269-271.

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