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Unique Monetary Equilibria with Interest Rate Rules

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Author Info

  • Bernardino Adao

    (Banco de Portugal)

  • Isabel Correia

    (Banco de Portugal)

  • Pedro Teles

    (Banco de Portugal)

Abstract

In contrast to previous literature, we show that it is possible to use interest rate rules in standard monetary models to implement equilibria that are globally unique. This is a contribution to a literature that either concentrates on conditions for local determinacy, or criticizes that approach showing that local determinacy might be associated with global indeterminacy. The interest rate rules we propose are price level targeting rules that respond to the forecasts of the future price level and future economic activity. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2009.11.003
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 14 (2011)
Issue (Month): 3 (July)
Pages: 432-442

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Handle: RePEc:red:issued:09-172

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Related research

Keywords: Monetary policy; Interest rate rules; Price level targeting; Unique equilibrium;

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References

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  1. Andrew Atkeson & V. V. Chari & Patrick J. Kehoe, 2008. "Sophisticated monetary policies," Working Papers 659, Federal Reserve Bank of Minneapolis.
  2. Bernardino Adão & Isabel Horta Correia & Pedro Teles, 2010. "Short and Long Interest Rate Targets," Working Papers w201015, Banco de Portugal, Economics and Research Department.
  3. John H. Cochrane, 2007. "Determinacy and Identification with Taylor Rules," NBER Working Papers 13409, National Bureau of Economic Research, Inc.
  4. Lawrence J. Christiano & Massimo Rostagno, 2001. "Money Growth Monitoring and the Taylor Rule," NBER Working Papers 8539, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. John H. Cochrane, 2011. "Determinacy and Identification with Taylor Rules," Journal of Political Economy, University of Chicago Press, vol. 119(3), pages 565 - 615.
  2. Bernardino Adão & Isabel Horta Correia & Pedro Teles, 2010. "Short and Long Interest Rate Targets," Working Papers w201015, Banco de Portugal, Economics and Research Department.
  3. Correia, Isabel & Farhi, Emmanuel & Nicolini, Juan Pablo & Teles, Pedro, 2011. "Unconventional Fiscal Policy at the Zero Bound," CEPR Discussion Papers 8193, C.E.P.R. Discussion Papers.
  4. Huw Dixon & Panayiotis M. Pourpourides, 2011. "On Imperfect Competition with Occasionally Binding Cash-in-Advance Constraints," Working Papers 2011-3, Central Bank of Cyprus.

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