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Interest rate rules and macroeconomic stabilization

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Author Info
Mark WEDER (School of Economics, the University of Adelaide and Humboldt-UniversitŠt zu Berlin, CDMA and CEPR)

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Abstract

High 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. SpŽcifie policy recommendations dŽpend on the fundamentals of the economy. i.e. the cmpirically true value of coefficient of relative risk aversion.

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Publisher Info
Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (REL - Recherches Economiques de Louvain) with number 2006025.

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Length: 20
Date of creation: 01 Jun 2006
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Handle: RePEc:ctl:louvre:2006025

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Related research
Keywords: Cash-in-advance economies; Taylor rules; sunspot equilibria;

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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

References listed on IDEAS
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. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules And Macroeconomic Stability: Evidence And Some Theory," The Quarterly Journal of Economics, MIT Press, vol. 115(1), pages 147-180, February. [Downloadable!] (restricted)
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  2. Jess Benhabib & Stephanie Schmitt-Grohe & Martin Uribe, 2003. "Backward-Looking Interest-Rate Rules, Interest-Rate Smoothing, and Macroeconomic Instability," Departmental Working Papers 200304, Rutgers University, Department of Economics. [Downloadable!]
    Other versions:
  3. 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!]
  4. Marc P. Giannoni & Michael Woodford, 2003. "Optimal Interest-Rate Rules: II. Applications," NBER Working Papers 9420, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Roger E. A. Farmer, 1999. "Macroeconomics of Self-fulfilling Prophecies, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262062038, December.
  6. Charles T. Carlstrom & Timothy S. Fuerst, 2000. "Forward-looking versus backward-looking Taylor rules," Working Paper 0009, Federal Reserve Bank of Cleveland. [Downloadable!]
  7. Charles T. Carlstrom & Timothy J. Fuerst, 1999. "Forecasts and sunspots: looking back for a better future," Economic Commentary, Federal Reserve Bank of Cleveland, issue Nov. [Downloadable!]
  8. Weder, Mark, 2006. "Taylor Rules and Macroeconomic Instability or How the Central Bank Can Preempt Sunspot Expectations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(3), pages 655-677, April. [Downloadable!] (restricted)
  9. Stephane Auray & Fabrice Collard & Patrick Feve, 2005. "Habit Persistence, Money Growth Rule and Real Indeterminacy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 48-67, January. [Downloadable!] (restricted)
  10. Christiano, Lawrence J, 2000. "Comment on Theoretical Analysis Regarding a Zero Lower Bound on Nominal Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(4), pages 905-30, November.
  11. Bennett T. McCallum, 2000. "Theoretical Analysis Regarding a Zero Lower Bound on Nominal Interest Rates," NBER Working Papers 7677, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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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. Weder, Mark, 2006. "Sticky Prices and Indeterminacy," CEPR Discussion Papers 5535, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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