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Determining optimal monetary speed limits

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  • Blake, Andrew P.

Abstract

The proposal by Walsh (2003) that policy should include a speed limit by having the change in the output gap as an additional term in a Taylor-type rule is shown to be exactly optimal given an appropriate parameterization.

Suggested Citation

  • Blake, Andrew P., 2012. "Determining optimal monetary speed limits," Economics Letters, Elsevier, vol. 116(2), pages 269-271.
  • Handle: RePEc:eee:ecolet:v:116:y:2012:i:2:p:269-271 DOI: 10.1016/j.econlet.2012.03.003
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    References listed on IDEAS

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    1. Jensen Henrik, 2011. "Estimated Interest Rate Rules: Do they Determine Determinacy Properties?," The B.E. Journal of Macroeconomics, De Gruyter, pages 1-22.
    2. Carl Walsh, 2003. "Speed Limit Policies: The Output Gap and Optimal Monetary Policy," American Economic Review, American Economic Association, vol. 93(1), pages 265-278, March.
    3. Schmitt-Grohe, Stephanie & Uribe, Martin, 2007. "Optimal simple and implementable monetary and fiscal rules," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1702-1725, September.
    4. John H. Cochrane, 2011. "Determinacy and Identification with Taylor Rules," Journal of Political Economy, University of Chicago Press, vol. 119(3), pages 565-615.
    5. McCallum, Bennett T., 2009. "Inflation determination with Taylor rules: Is new-Keynesian analysis critically flawed?," Journal of Monetary Economics, Elsevier, vol. 56(8), pages 1101-1108, November.
    6. Bennett T. McCallum & Edward Nelson, 2005. "Targeting versus instrument rules for monetary policy," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 597-612.
    7. Bennett T. McCallum & Edward Nelson, 2005. "Targeting versus instrument rules for monetary policy," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 597-612.
    8. Livio Stracca, 2007. "A Speed Limit Monetary Policy Rule for the Euro Area," International Finance, Wiley Blackwell, vol. 10(1), pages 21-41, March.
    9. Lars E. O. Svensson, 2005. "Targeting versus instrument rules for monetary policy: what is wrong with McCallum and Nelson?," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 613-626.
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    Cited by:

    1. Hess Chung & Edward Herbst & Michael T. Kiley, 2015. "Effective Monetary Policy Strategies in New Keynesian Models: A Reexamination," NBER Macroeconomics Annual, University of Chicago Press, vol. 29(1), pages 289-344.
    2. Brendon, Charles & Paustian, Matthias & Yates, Tony, 2013. "The pitfalls of speed-limit interest rate rules at the zero lower bound," Bank of England working papers 473, Bank of England.

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