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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. Clarida, R. & Gali, J. & Gertler, M., 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Working Papers 99-13, C.V. Starr Center for Applied Economics, New York University.
  2. Gaetano Bloise & J. H. Dreze & H. M. Polemarchakis, 2003. "Monetary Equilibria over an Infinite Horizon," Discussion Papers 03-19, University of Copenhagen. Department of Economics.
  3. Adão, Bernardino & Correia, Isabel & Teles, Pedro, 2001. "Gaps and Triangles," CEPR Discussion Papers 2668, C.E.P.R. Discussion Papers.
  4. Ben S. Bernanke & Michael Woodford, 1997. "Inflation forecasts and monetary policy," Proceedings, Federal Reserve Bank of Cleveland, pages 653-686.
  5. 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.
  6. Benhabib, Jess & Schmitt-Grohé, Stephanie & Uribe, Martín, 1999. "The Perils of Taylor Rules," CEPR Discussion Papers 2314, C.E.P.R. Discussion Papers.
  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. McCallum, Bennett T., 1981. "Price level determinacy with an interest rate policy rule and rational expectations," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 319-329.
  9. 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.
  10. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "Monetary policy rules and macroeconomic stability: Evidence and some theory," Economics Working Papers 350, Department of Economics and Business, Universitat Pompeu Fabra, revised May 1999.
  11. 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.
  12. Loisel, O., 2006. "Bubble-free interest-rate rules," Working papers 161, Banque de France.
  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. Charles T. Carlstrom & Timothy S. Fuerst, 2002. "Taylor Rules in a Model that Satisfies the Natural-Rate Hypothesis," American Economic Review, American Economic Association, vol. 92(2), pages 79-84, May.
  15. Bill Dupor, 2000. "Investment and Interest Rate Policy," Econometric Society World Congress 2000 Contributed Papers 0007, Econometric Society.
  16. Marco Bassetto, 2004. "Negative Nominal Interest Rates," American Economic Review, American Economic Association, vol. 94(2), pages 104-108, May.
  17. Tomoyuki Nakajima & Herakles Polemarchakis, 2005. "Money and Prices Under Uncertainty," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 223-246.
  18. Charles T. Carlstrom & Timothy S. Fuerst, 2001. "Timing and real indeterminacy in monetary models," Working Paper 9910R, Federal Reserve Bank of Cleveland.
  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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