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Monetary Policy with Single Instrument Feedback Rules

  • Bernardino Adão
  • Isabel Horta Correia
  • Pedro Teles

We consider a standard cash in advance monetary model with flexible prices or prices set in advance and show that there are interest rate or money supply rules such that equilibria are unique. The existence of these single instrument rules depends on whether the economy has an infinite horizon or an arbitrarily large but finite horizon.

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File URL: http://www.bportugal.pt/en-US/BdP%20Publications%20Research/WP200419.pdf
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Paper provided by Banco de Portugal, Economics and Research Department in its series Working Papers with number w200419.

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Date of creation: 2004
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Handle: RePEc:ptu:wpaper:w200419
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  1. Tomoyuki Nakajima & Herakles Polemarchakis, 2005. "Money and Prices Under Uncertainty," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 223-246.
  2. Richard Clarida & Jordi Gali & Mark Gertler, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," NBER Working Papers 6442, National Bureau of Economic Research, Inc.
  3. Bernardino Adão & Isabel Correia & Pedro Teles, 2004. "Monetary policy with state contingent interest rates," Working Paper Series WP-04-26, Federal Reserve Bank of Chicago.
  4. Richard Clarida & Jordi Gali & Mark Gertler, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," NBER Working Papers 7147, National Bureau of Economic Research, Inc.
  5. Marco Bassetto, 2004. "Negative Nominal Interest Rates," American Economic Review, American Economic Association, vol. 94(2), pages 104-108, May.
  6. Charles T. Carlstrom & Timothy S. Fuerst, 2001. "Taylor rules in a model that satisfies the natural rate hypothesis," Working Paper 0116, Federal Reserve Bank of Cleveland.
  7. Stephanie Schmitt-Grohe & Jess Benhabib & Martin Uribe, 2001. "Monetary Policy and Multiple Equilibria," American Economic Review, American Economic Association, vol. 91(1), pages 167-186, March.
  8. Loisel, O., 2006. "Bubble-free interest-rate rules," Working papers 161, Banque de France.
  9. Adão, Bernardino & Correia, Isabel & Teles, Pedro, 2001. "Gaps and Triangles," CEPR Discussion Papers 2668, C.E.P.R. Discussion Papers.
  10. Ben S. Bernanke & Michael Woodford, 1997. "Inflation Forecasts and Monetary Policy," NBER Working Papers 6157, National Bureau of Economic Research, Inc.
  11. Benhabib, Jess & Schmitt-Grohé, Stephanie & Uribe, Martín, 1999. "The Perils of Taylor Rules," CEPR Discussion Papers 2314, C.E.P.R. Discussion Papers.
  12. Bennett T. McCallum, 1982. "Price Level Determinacy with an Interest Rate Policy Rule and Rational Expectations," NBER Working Papers 0559, National Bureau of Economic Research, Inc.
  13. Lucas, Robert Jr. & Stokey, Nancy L., 1983. "Optimal fiscal and monetary policy in an economy without capital," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 55-93.
  14. Sargent, Thomas J & Wallace, Neil, 1975. ""Rational" Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 241-54, April.
  15. Gaetano Bloise & Jacques Dréze & Herakles Polemarchakis, 2005. "Monetary equilibria over an infinite horizon," Economic Theory, Springer, vol. 25(1), pages 51-74, 01.
  16. Bill Dupor, 2000. "Investment and Interest Rate Policy," Econometric Society World Congress 2000 Contributed Papers 0007, Econometric Society.
  17. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
  18. Carlstrom, Charles T. & Fuerst, Timothy S., 2001. "Timing and real indeterminacy in monetary models," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 285-298, April.
  19. Lawrence J. Christiano & Massimo Rostagno, 2001. "Money Growth Monitoring and the Taylor Rule," NBER Working Papers 8539, National Bureau of Economic Research, Inc.
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