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Taylor Rules in Practice: How Central Banks can Intercept Sunspot Expectations

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Author Info
Weder, Mark

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Abstract

This Paper derives new results on the effects of employing Taylor rules in economies that are subject to real-market imperfections such as production externalities. It suggests that rules that should be avoided (chosen) in perfect-markets environments do in fact ensure (yield) unique (multiple) rational expectations solutions in alternative settings. Therefore, exact knowledge on the degree of market imperfection is pivotal for robust policy advice.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3899.

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Date of creation: May 2003
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Handle: RePEc:cpr:ceprdp:3899

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Related research
Keywords: cash-in-advance economies; increasing returns-to-scale; indeterminacy; taylor rules;

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Find related papers by JEL classification:
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

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References listed on IDEAS
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  28. Laitner, John & Stolyarov, Dmitriy, 2004. "Aggregate returns to scale and embodied technical change: theory and measurement using stock market data," Journal of Monetary Economics, Elsevier, vol. 51(1), pages 191-233, January. [Downloadable!] (restricted)
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    Other versions:
Full references

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.)

  1. Mark Weder, 2004. "Endogenous Monetary Growth Rules and Determinacy in Cash-in-Advance Models," Economics Bulletin, Economics Bulletin, vol. 5(11), pages 1-7. [Downloadable!]
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