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Taylor Rules in Practice: How Central Banks can Intercept Sunspot Expectations

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  • Weder, Mark

Abstract

This Paper derives new results on the effects of employing Taylor rules in economies that are subject to real-market imperfections such as production externalities. It suggests that rules that should be avoided (chosen) in perfect-markets environments do in fact ensure (yield) unique (multiple) rational expectations solutions in alternative settings. Therefore, exact knowledge on the degree of market imperfection is pivotal for robust policy advice.

Suggested Citation

  • Weder, Mark, 2003. "Taylor Rules in Practice: How Central Banks can Intercept Sunspot Expectations," CEPR Discussion Papers 3899, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3899
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    References listed on IDEAS

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    Cited by:

    1. repec:ebl:ecbull:v:5:y:2004:i:11:p:1-7 is not listed on IDEAS
    2. Mark Weder, 2004. "Endogenous Monetary Growth Rules and Determinacy in Cash-in-Advance Models," Economics Bulletin, AccessEcon, vol. 5(11), pages 1-7.

    More about this item

    Keywords

    cash-in-advance economies; increasing returns-to-scale; indeterminacy; taylor rules;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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