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Unique Monetary Equilibria with Interest Rate Rules

  • Bernardino Adao

    (Banco de Portugal)

  • Isabel Correia

    (Banco de Portugal)

  • Pedro Teles

    (Banco de Portugal)

In contrast to previous literature, we show that it is possible to use interest rate rules in standard monetary models to implement equilibria that are globally unique. This is a contribution to a literature that either concentrates on conditions for local determinacy, or criticizes that approach showing that local determinacy might be associated with global indeterminacy. The interest rate rules we propose are price level targeting rules that respond to the forecasts of the future price level and future economic activity. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2009.11.003
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 14 (2011)
Issue (Month): 3 (July)
Pages: 432-442

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Handle: RePEc:red:issued:09-172
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  1. Adão, Bernardino & Correia, Isabel & Teles, Pedro, 2010. "Short and Long Interest Rate Targets," CEPR Discussion Papers 7935, C.E.P.R. Discussion Papers.
  2. Lawrence J. Christiano & Massimo Rostagno, 2001. "Money Growth Monitoring and the Taylor Rule," NBER Working Papers 8539, National Bureau of Economic Research, Inc.
  3. John H. Cochrane, 2007. "Determinacy and Identification with Taylor Rules," NBER Working Papers 13410, National Bureau of Economic Research, Inc.
  4. Andrew Atkeson & V. V. Chari & Patrick J. Kehoe, 2008. "Sophisticated monetary policies," Working Papers 659, Federal Reserve Bank of Minneapolis.
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