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Intertemporal Coordination Failure and Monetary Policy

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  • Ronny Mazzocchi

Abstract

The turn of century long period of sustained growth with low and stable inflation let the economic profession and the public opinion to think that the right theoretical foundation for macroeconomic policy had been found. However the Great Crisis of 2008 indicates a spectac- ular failure of this framework in dealing with sources of macroeconomic instability and providing policy advise. Financial instability is the new challenge for monetary policy. Most of the recent research indicates that financial crises follow prolonged unwinding of investment-saving imbalances which are not contemplated by the standard theoretical framework. This paper draws a dynamic model where investment- saving imbalances are allowed to develop. It introduces different types of feedback interest-rate rules in order to provide some preliminary indications for the conduct of monetary policy.

Suggested Citation

  • Ronny Mazzocchi, 2013. "Intertemporal Coordination Failure and Monetary Policy," DEM Discussion Papers 2013/15, Department of Economics and Management.
    • Handle: RePEc:trn:utwpem:2013/15
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    Cited by:

    1. Yuli Radev, 2016. "Dynamic disequilibrium and investment - saving imbalance," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 126-149.
    2. Yuli Radev, 2015. "New dynamic disequilibrium," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 65-90.
    3. Gobbi, Lucio & Mazzocchi, Ronny & Tamborini, Roberto, 2019. "Monetary policy, de-anchoring of inflation expectations, and the “new normal”," Journal of Macroeconomics, Elsevier, vol. 61(C), pages 1-1.
    4. Yılmaz, Engin & Süslü, Bora, 2015. "The Relation between Money, Interest and Consumption in Developing Countries: The Case of Turkey," MPRA Paper 68614, University Library of Munich, Germany.
    5. Ronny Mazzocchi, 2013. "Monetary Policy when the NAIRI is unknown: The Fed and the Great Deviation," DEM Discussion Papers 2013/16, Department of Economics and Management.
    6. July Radev, 2017. "Monetary policy and the dynamic disequilibrium," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 96-114.

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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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