The perverse response of interest rates
The optimal monetary policy response to an increase in aggregate demand may be to reduce the interest rate. This apparently perverse response of interest rates can occur when the Phillips curve is non-linear.
References listed on IDEAS
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- Douglas Laxton & Guy Meredith & David Rose, 1995.
"Asymmetric Effects of Economic Activity on Inflation: Evidence and Policy Implications,"
IMF Staff Papers,
Palgrave Macmillan, vol. 42(2), pages 344-374, June.
- Douglas Laxton & Guy M Meredith & David Rose, 1994. "Asymmetric Effects of Economic Activityon Inflation; Evidence and Policy Implications," IMF Working Papers 94/139, International Monetary Fund.
- Andrew J. Filardo, 1998. "New evidence on the output cost of fighting inflation," Economic Review, Federal Reserve Bank of Kansas City, issue Q III.
- Clarida, R. & Gali, J. & Gertler, M., 1999.
"The Science of Monetary Policy: A New Keynesian Perspective,"
99-13, C.V. Starr Center for Applied Economics, New York University.
- Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
- Richard Clarida & Jordi Galí & Mark Gertler, 1997. "The science of monetary policy: A new Keynesian perspective," Economics Working Papers 356, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 1999.
- Clarida, Richard & Galí, Jordi & Gertler, Mark, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," CEPR Discussion Papers 2139, C.E.P.R. Discussion Papers.
- Richard Clarida & Jordi Gali & Mark Gertler, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," NBER Working Papers 7147, National Bureau of Economic Research, Inc.
- Joseph Stiglitz, 1997. "Reflections on the Natural Rate Hypothesis," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 3-10, Winter.
- Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
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