On the optimality of eliminating seasonality in nominal interest rates
AbstractOptimal monetary policy for an economy with seasonal fluctuations and a cash-in-advance requirement on the purchase of consumption goods is studied. It is shown that the short delay in the availability of newly acquired funds for consumption purchases (the hallmark of cash-in-advance models) typically makes the seasonal steady state inefficient. It is also shown that monetary policy can overcome this inefficiency by keeping the nominal interest rate constant over the seasons. An analytical model is also presented to explore the effects of seasonal smoothing of nominal interest rates on the seasonal amplitude of other closely related variables.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 97-2.
Date of creation: 1997
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- Stephen Williamson, 2004.
"Search, Limited Participation, and Monetary Policy,"
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- Stephen D. Williamson, 2006. "Search, Limited Participation, And Monetary Policy ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 107-128, 02.
- Pere Gomis-Porqueras & Bruce Smith, 2006. "The seasonality of banking failures during the late National Banking Era," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 39(1), pages 296-319, February.
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