Monetary Shocks And The Nominal Interest Rate
This paper reconsiders the effects of monetary shocks on the nominal interest rate in a standard macroeconomic model. It is determined that, when the policy objective is controlling the money stock, money supply shocks generate a situation of excess demand for money. The positive relationship between nominal interest rates and monetary innovations in the United States following the 1979 change in regime is, thus, not puzzling but perfectly consistent with standard theory. Nominal interest rate decreases are possible only when "fine-tuning" rules are adopted. Copyright 1992 by The London School of Economics and Political Science.
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|Date of creation:||1989|
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- McCallum, Bennett T., 1983.
"On non-uniqueness in rational expectations models : An attempt at perspective,"
Journal of Monetary Economics,
Elsevier, vol. 11(2), pages 139-168.
- Bennett T. McCallum, 1981. "On Non-Uniqueness in Rational Expectations Models: An Attempt at Perspective," NBER Working Papers 0684, National Bureau of Economic Research, Inc.
- Barro, Robert J, 1984. "Rational Expectations and Macroeconomics in 1984," American Economic Review, American Economic Association, vol. 74(2), pages 179-182, May. Full references (including those not matched with items on IDEAS)
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