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Neo-Fisherian monetary policy

Author

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  • Kortelainen, Mika

Abstract

According to the Neo-Fisherian Hypothesis a nominal policy rate increase leads to an in-crease in the rate of inflation also in the short-run and the effects of Neo-Fisherian forward guidance on inflation and output are small. These results are obtained by assuming that the nominal interest rate is unresponsive to the output gap and inflation at least temporarily and that an arbitrary assumption that a backward stable perfect foresight solution is selected among a continuum of perfect foresight equilibria is valid. The result that nominal policy rates can move inflation in the same direction is at odds with monetary theory and practice.

Suggested Citation

  • Kortelainen, Mika, 2017. "Neo-Fisherian monetary policy," BoF Economics Review 2/2017, Bank of Finland.
    • Handle: RePEc:zbw:bofecr:22017
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    File URL: https://www.econstor.eu/bitstream/10419/212987/1/bofer-2017-02.pdf
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    Cited by:

    1. Lucio Gobbi & Ronny Mazzocchi & Roberto Tamborini, 2022. "Monetary policy, rational confidence, and Neo‐Fisherian depressions," Metroeconomica, Wiley Blackwell, vol. 73(4), pages 1179-1199, November.

    More about this item

    Keywords

    Neo-Fisherian Hypothesis; Monetary Policy; Liquidity;
    All these keywords.

    JEL classification:

    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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