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Investment and Interest Rate Policy

Author

Listed:
  • Bill Dupor

    (University of Pennsylvania)

Abstract

The paper's theorems reverse two standard results of New Keynesian economics simply by appending endogenous investment to a benchmark imperfect competition-sticky price model. Our results are: (a) a passive interest rate rule, where the monetary authority responds to inflation by lowering the real interest rate, implies local equilibrium uniqueness, whereas an active rule generates either indeterminacy or no equilibria locally; (b) a temporary, exogenous increase in the nominal interest rate causes a temporary increase in output and investment.

Suggested Citation

  • Bill Dupor, 2000. "Investment and Interest Rate Policy," Econometric Society World Congress 2000 Contributed Papers 0007, Econometric Society.
    • Handle: RePEc:ecm:wc2000:0007
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    References listed on IDEAS

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