Can monetary policy guide expectations toward desirable outcomes when equilibrium and welfare are sensitive to alternative, commonly held rational beliefs? This paper studies this question in an exchange economy with endogenous debt limits in which dynamic complementarities between dated debt limits support two Pareto-ranked steady states: a suboptimal, locally stable autarkic state and a constrained optimal, locally unstable trading state. The authors identify feedback policies that reverse the stability properties of the two steady states and ensure rapid convergence to the constrained optimal state.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Article provided by Federal Reserve Bank of St. Louis in its journal Review.
Volume (Year): (2007) Issue (Month): Jul () Pages: 331-342 Download reference. The following formats are available: HTML,
plain text,
BibTeX,
RIS (EndNote),
ReDIF
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Benhabib, Jess & Schmitt-Grohe, Stephanie & Uribe, Martin, 2001.
"The Perils of Taylor Rules,"
Journal of Economic Theory,
Elsevier, vol. 96(1-2), pages 40-69, January.
[Downloadable!] (restricted)
Other versions:
Benhabib, Jess & Schmitt-Grohe, Stephanie & Uribe, Martin, 1998.
"The Perils of Taylor Rules,"
Working Papers
98-37, C.V. Starr Center for Applied Economics, New York University.
[Downloadable!]
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)