Interest Rate Rules, Price Determinacy and the Value of Money in a non Ricardian World
AbstractThis article studies under which conditions interest rate rules "à la Taylor" results, which are standard in the traditional "Ricardian" taxation, Financial constraints. single dynasty of consumers: (1) a pure interest rate peg leads to nominal price indeterminacy; (2) a strong reaction (usually more than one for one) of nominal interest rates to inflation is conducive to price determinacy (the Taylor principle). This article extends the analysis to rigorous dynamic non Ricardian models. The results turn out to be quite different, since notably prices may be determinate if the interest rate responds less than one for one to inflation, and even under a pure interest rate peg. (Copyright: Elsevier)
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Bibliographic InfoArticle provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.
Volume (Year): 8 (2005)
Issue (Month): 3 (July)
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Find related papers by JEL classification:
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
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