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

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  • Weder, Mark

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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Bibliographic Info

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

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References

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Cited by:
  1. repec:ebl:ecbull:v:5:y:2004:i:11:p:1-7 is not listed on IDEAS
  2. Mark Weder, 2004. "Endogenous Monetary Growth Rules and Determinacy in Cash-in-Advance Models," Economics Bulletin, AccessEcon, vol. 5(11), pages 1-7.

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