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Heterogeneous Consumers, Demand Regimes, Monetary Policy Efficacy and Determinacy

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Author Info

  • Giovanni Di Bartolomeo

    (Università di Roma La Sapienza)

  • Lorenza Rossi

    (Università di Roma Tor Vergata)

Abstract

The aim of this paper is to investigate both the efficacy and the stability properties of monetary policy rules in presence of heterogeneous consumers. We aim to underline the link between the well- known Taylor Principle and the demand-policy regimes, defined on the basis of the monetary policy transmission mechanism. By developing an analytical analysis, we show that the transmission mechanism plays a key role on monetary efficacy and equilibrium determinacy.

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File URL: http://128.118.178.162/eps/mac/papers/0508/0508028.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0508028.

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Length: 24 pages
Date of creation: 25 Aug 2005
Date of revision:
Handle: RePEc:wpa:wuwpma:0508028

Note: Type of Document - pdf; pages: 24
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Web page: http://128.118.178.162

Related research

Keywords: Heterogeneous consumers; liquidity constraints; determinacy; Euler equation.;

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References

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  1. Campbell, John Y. & Mankiw, N. Gregory, 1991. "The response of consumption to income : A cross-country investigation," European Economic Review, Elsevier, vol. 35(4), pages 723-756, May.
  2. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2005. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 1-45, February.
  3. Jeffery D. Amato & Thomas Laubach, 2002. "Rule-of-thumb behaviour and monetary policy," Finance and Economics Discussion Series 2002-5, Board of Governors of the Federal Reserve System (U.S.).
  4. John Y. Campbell & N. Gregory Mankiw, 1991. "Permanent Income, Current Income, and Consumption," NBER Working Papers 2436, National Bureau of Economic Research, Inc.
  5. Yamin Ahmad, 2002. "Money Market Rates and Implied CCAPM Rates: Some International Evidence," Working Papers gueconwpa~02-02-06, Georgetown University, Department of Economics.
  6. Bernanke, Ben S & Woodford, Michael, 1997. "Inflation Forecasts and Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(4), pages 653-84, November.
  7. Canzoneri, Matthew B. & Cumby, Robert E. & Diba, Behzad T., 2007. "Euler equations and money market interest rates: A challenge for monetary policy models," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 1863-1881, October.
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Citations

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Cited by:
  1. Giovanni Di Bartolomeo & Lorenza Rossi & Massimiliano Tancioni, 2007. "Monetary Policy under Rule-of-Thumb Consumers and External Habits," Money Macro and Finance (MMF) Research Group Conference 2006 1, Money Macro and Finance Research Group.
  2. Giovanni Di Bartolomeo & Lorenzo Rossi & Massimiliano Tancioni, 2006. "Monetary Policy under Rule-of-Thumb Consumers and External Habits: An International Empirical Comparison," Working Papers 97, University of Rome La Sapienza, Department of Public Economics.

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