Interest Rate Rules and Macroeconomic Stabilization
AbstractHigh degrees of relative risk aversion induce indeterminacy in cash-in-advance economies. This paper finds that Taylor-style policies can pre-empt such sunspot equilibria. Specific policy recommendations depend on the fundamentals of the economy, i.e. the empirically true value of coecient of relative risk aversion.
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Bibliographic InfoPaper provided by University of Adelaide, School of Economics in its series School of Economics Working Papers with number 2006-01.
Length: 11 pages
Date of creation: 2006
Date of revision:
cash-in-advance economies; Taylor rules; sunspot equilibria;
Other versions of this item:
- Mark Weder, 2006. "Interest rate rules and macroeconomic stabilization," Recherches économiques de Louvain, De Boeck Université, vol. 72(2), pages 195-204.
- Mark WEDER, 2006. "Interest rate rules and macroeconomic stabilization," Discussion Papers (REL - Recherches Economiques de Louvain) 2006025, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-04-01 (All new papers)
- NEP-CBA-2006-04-01 (Central Banking)
- NEP-MAC-2006-04-01 (Macroeconomics)
- NEP-MON-2006-04-01 (Monetary Economics)
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.:
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9558, National Bureau of Economic Research, Inc.
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- Jess Benhabib & Stephanie Schitt-Grohe & Martin Uribe, 2002. "Backward-Looking Interest-Rate Rules, Interest-Rate Smoothing, and Macroeconomic Instability," PIER Working Paper Archive 03-005, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 14 Feb 2003.
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- Jess Benhabib & Stephanie Schmitt-Grohe & Martin Uribe, 2003. "Backward-looking interest-rate rules, interest-rate smoothing, and macroeconomic instability," Working Papers 03-4, Federal Reserve Bank of Philadelphia.
- Weder, Mark, 2003.
"Taylor Rules and Macroeconomic Instability or How the Central Bank Can Pre-empt Sunspot Expectations,"
SFB 373 Discussion Papers
2003,49, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
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506439000000000394, UCLA Department of Economics.
- Charles T. Carlstrom & Timothy S. Fuerst, 2000. "Forward-looking versus backward-looking Taylor rules," Working Paper 0009, Federal Reserve Bank of Cleveland.
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