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Constant interest rate projections without the curse of indeterminacy



Constant interest rate (CIR) projections are often criticized on the grounds that they are inconsistent with the existence of a unique equilibrium in a variety of forward-looking models. This note shows how to construct CIR projections that are not subject to that criticism, using a standard New Keynesian model as a reference framework.

Suggested Citation

  • Jordi Galí, 2007. "Constant interest rate projections without the curse of indeterminacy," Economics Working Papers 1057, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 2008.
  • Handle: RePEc:upf:upfgen:1057

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    References listed on IDEAS

    1. Francisco José Goerlich Gisbert & Susana García & Vicente Orts Ríos, 1994. "Macromagnitudes básicas a nivel sectorial de la industria española: series históricas," Working Papers. Serie EC 1994-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    2. Stockman, Alan C., 1988. "Sectoral and national aggregate disturbances to industrial output in seven European countries," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 387-409.
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    Cited by:

    1. Simon Wren-Lewis & Fabian Eser, 2009. "When is Monetary Policy All we Need?," Economics Series Working Papers 430, University of Oxford, Department of Economics.

    More about this item


    Interest rate peg; in.ation targeting; conditional forecasts; interest rate rules; multiple equilibria;

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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