New Principles For Stabilization Policy

In a broad class of discrete-time rational-expectations models, I consider stabilizationpolicy rules making the policy instrument react with coecient ϕ ∈ R to a (past, current, or expected future) generic variable at time horizon h ∈ Z, possibly among other variables. Using two complex-analysis theorems, I establish some simple, necessary or sucient conditions on ϕ and h for these rules to ensure local-equilibrium determinacy. These conditions lead to new, general principles for stabilization policy. Building on these conditions, I characterize the circumstances under which (a generalized version of) the Taylor principle is necessary or sucient for determinacy. I also provide the rst hard guidelines for nding rules with robust determinacy properties across alternative models.