Monetary and fiscal policy rules in a model with capital accumulation and potentially non-superneutral money
We consider the properties of two monetary policy rules (monetary targeting, Taylor-type interest rate rule) in an intertemporal equilibrium model with capital accumulation and two outside assets (government bonds, fiat money). The paper shows that the long-run behaviour of the economy depends critically on whether under the monetary-fiscal regime the steady-state real interest rate is independent of inflation. If this is the case, there exists in our model a unique steady state with stable adjustment dynamics under either monetary policy rule. By contrast, if superneutrality fails, dynamics under the interest rate rule may suffer from global indeterminacy arising from multiple steady states which do not necessarily differ in terms of the 'activeness' of the interest rate feedback on inflation. This is ruled out under monetary targeting.
|Date of creation:||2002|
|Contact details of provider:|| Postal: Postfach 10 06 02, 60006 Frankfurt|
Phone: 0 69 / 95 66 - 0
Fax: 0 69 / 95 66 30 77
Web page: http://www.bundesbank.de/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:zbw:bubdp1:4187. 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: (ZBW - German National Library of Economics)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.