This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Price Level Determinacy with an Interest Rate Policy Rule and Rational Expectations

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Bennett T. McCallum

Additional information is available for the following registered author(s):

Abstract

This paper reconsiders a result obtained by Sargent and Wallace, namely, that price level indeterminacy obtains in their well-known model if the monetary authorities adopt a policy feedback rule for the interest rate rather than the money stock. Since the Federal Reserve seems often to have used the federal funds rate as its operating instrument, with the money stack determined by the quantity demanded, this result suggests that the Sargent-Wallace model -- as well as others incorporating rational expectations -- is inconsistent with U.S. experience. It is here shown, however, that the indeterminacy result vanishes if the interest rate rule is chosen so as to have some desired effect on the expected quantity of money demanded. This revised conclusion holds even if considerable weight is given, in the choice of a rule, to the aim of smoothing interest rate fluctuations.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/papers/w0559.pdf
File Format: application/pdf
File Function:
Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0559.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length:
Date of creation: Feb 1982
Date of revision:
Publication status: published as McCallum, Bennett T. "Price Level Determinacy With an Interest Rate Policy Rule and Rational Expectations." Journal of Monetary Economics, Vol. 8, No. 3, (November 1981), pp. 319-329.
Handle: RePEc:nbr:nberwo:0559

Note: EFG
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords:

Other versions of this item:

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. John H. Kareken & Preston J. Miller, 1976. "The policy procedure of the FOMC: a critique," Working Papers 63, Federal Reserve Bank of Minneapolis. [Downloadable!]
  2. Modigliani, Franco, 1977. "The Monetarist Controversy or, Should We Forsake Stabilization Policies?," American Economic Review, American Economic Association, vol. 67(2), pages 1-19, March.
    Other versions:
  3. Friedman, Milton, 1970. "A Theoretical Framework for Monetary Analysis," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 193-238, March-Apr. [Downloadable!] (restricted)
  4. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-34, June.
  5. repec:fip:fedreq:y:1975:i:sep/oct:p:3-14:n:v.61no.5 is not listed on IDEAS
  6. Volcker, Paul A., 1978. "The role of monetary targets in an age of inflation," Journal of Monetary Economics, Elsevier, vol. 4(2), pages 329-339, April. [Downloadable!] (restricted)
  7. Benjamin M. Friedman, 1977. "The Inefficiency of Short-Run Monetary Targets for Monetary Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 8(1977-2), pages 293-346. [Downloadable!]
  8. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec.. [Downloadable!] (restricted)
  9. Phelps, Edmund S & Taylor, John B, 1977. "Stabilizing Powers of Monetary Policy under Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 163-90, February. [Downloadable!] (restricted)
  10. McCallum, Bennett T, 1978. "Price Level Adjustments and the Rational Expectations Approach to Macroeconomic Stabilization Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 10(4), pages 418-36, November. [Downloadable!] (restricted)
  11. Poole, William, 1975. "The Making of Monetary Policy: Description and Analysis," Economic Inquiry, Oxford University Press, vol. 13(2), pages 253-65, June.
  12. Poole, William, 1970. "Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model," The Quarterly Journal of Economics, MIT Press, vol. 84(2), pages 197-216, May. [Downloadable!] (restricted)
    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.)
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.
Statistics
Access and download statistics

Did you know? IDEAS also indexes book chapters.

This page was last updated on 2008-7-24.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.