Monetary Policy with State Contingent Interest Rates
What instruments of monetary policy must be used in order to implement a unique equilibrium? This paper revisits the issues addressed by Poole (1970) and Sargent and Wallace (1975) on the multiplicity of equilibria when policy is conducted with either interest rate or money supply rules. We show that if monetary policy is conducted with both interest rates and money supplies as independent instruments it is possible to implement a unique equilibrium. This policy may require the government to set interest rates for all dates and states and in addition set exogenously the money supply every period in some, but not all, states. We show that an alternative policy that would implement a unique equilibrium sets exogenously the state contingent nominal interest rates as well as the initial money supply. These results hold whether prices are flexible or set in advance.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.EconomicDynamics.org/society.htm
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Bernardino Adão & Isabel Horta Correia & Pedro Teles, 2001.
"Gaps and Triangles,"
w200102, Banco de Portugal, Economics and Research Department.
- Bernardino Ad�o & Isabel Correia & Pedro Teles, 2003. "Gaps and Triangles," Review of Economic Studies, Oxford University Press, vol. 70(4), pages 699-713.
- Bernardino Adao & Isabel Correia & Pedro Teles, 2003. "Gaps and Triangles," Review of Economic Studies, Wiley Blackwell, vol. 70(4), pages 699-713, October.
- Adão, Bernardino & Correia, Isabel & Teles, Pedro, 2001. "Gaps and Triangles," CEPR Discussion Papers 2668, C.E.P.R. Discussion Papers.
- Bernardino Adao, 2000. "Gaps and Triangles," Econometric Society World Congress 2000 Contributed Papers 1904, Econometric Society.
- Bernardino Adão & Isabel Correia & Pedro Teles, 2001. "Gaps and triangles," Working Paper Series WP-01-13, Federal Reserve Bank of Chicago.
- Juan Pablo Nicolini & Francisco Buera, 2002.
"Optimal Maturity of Governement Debt without state contingent bonds,"
Department of Economics Working Papers
016, Universidad Torcuato Di Tella.
- Buera, Francisco & Nicolini, Juan Pablo, 2004. "Optimal maturity of government debt without state contingent bonds," Journal of Monetary Economics, Elsevier, vol. 51(3), pages 531-554, April.
- Lawrence J. Christiano & Massimo Rostagno, 2001. "Money Growth Monitoring and the Taylor Rule," NBER Working Papers 8539, National Bureau of Economic Research, Inc.
- 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.
- Bennett T. McCallum, 1980. "Price Level Determinacy with an Interest Rate Policy Rule and Rational Expectations," NBER Working Papers 0559, National Bureau of Economic Research, Inc.
- George-Marios Angeletos, 2002. "Fiscal Policy With Noncontingent Debt And The Optimal Maturity Structure," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 1105-1131, August.
- Charles T. Carlstrom & Timothy S. Fuerst, 2001.
"Timing and real indeterminacy in monetary models,"
9910R, Federal Reserve Bank of Cleveland.
- Gaetano Bloise & Jacques Dréze & Herakles Polemarchakis, 2005.
"Monetary equilibria over an infinite horizon,"
Springer, vol. 25(1), pages 51-74, 01.
- DREZE, Jacques & POLEMARCHAKIS, Heracles, 1995.
CORE Discussion Papers
1995078, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Tomoyuki Nakajima & Herakles Polemarchakis, 2005. "Money and Prices Under Uncertainty," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 223-246.
When requesting a correction, please mention this item's handle: RePEc:red:sed004:813. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)
If references are entirely missing, you can add them using this form.