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The stability condition of a forward looking Taylor rule

Stability condition is an essential topic of monetary policy rules. If the policy rule can not satisfy the stability condition, it is difficult to treat the policy rule as the policy implementation guidelines. This paper purposes to derive the stability condition of a forward-looking Taylor rule with and without interest rate smoothing. This paper also conducts the empirical analysis of the stability condition of a forward-looking Taylor rule with data of China.

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File URL: http://www.uq.edu.au/economics/eaerg/dp/0705.pdf
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Paper provided by School of Economics, University of Queensland, Australia in its series EAERG Discussion Paper Series with number 0705.

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Handle: RePEc:qld:uqeaer:07
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  1. Bennett T. McCallum, 1993. "Specification and Analysis of a Monetary Policy Rule for Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 11(2), pages 1-45, December.
  2. Athanasios Orphanides, 2001. "Monetary Policy Rules Based on Real-Time Data," American Economic Review, American Economic Association, vol. 91(4), pages 964-985, September.
  3. Batini, Nicoletta & Nelson, Edward, 2000. "Optimal Horizons for Inflation Targeting," Working Paper Series 103, Sveriges Riksbank (Central Bank of Sweden).
  4. Marvin Goodfriend, 1987. "Interest rate smoothing and price level trend-stationarity," Working Paper 87-03, Federal Reserve Bank of Richmond.
  5. Woodford, Michael, 2000. "Optimal Monetary Policy Inertia," Seminar Papers 666, Stockholm University, Institute for International Economic Studies.
  6. Glenn D. Rudebusch & Lars E. O. Svensson, 1998. "Policy rules for inflation targeting," Working Papers in Applied Economic Theory 98-03, Federal Reserve Bank of San Francisco.
  7. Williams, John C. & Levin, Andrew T. & Wieland, Volker, 2001. "The performance of forecast-based monetary policy rules under model uncertainty," Working Paper Series 0068, European Central Bank.
  8. 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.
  9. Goodfriend, Marvin, 1991. "Interest rates and the conduct of monetary policy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 34(1), pages 7-30, January.
  10. Bennett T. McCallum, 1989. "Could A Monetary Base Rule Have Prevented the Great Depression?," NBER Working Papers 3162, National Bureau of Economic Research, Inc.
  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. Rafael Domenech & Mayte Ledo & David Taguas, 2001. "A Small Forward-Looking Macroeconomic Model for EMU," Working Papers 0102, BBVA Bank, Economic Research Department.
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