Determinacy of Interest Rate Rules with Bond Transaction Services in a Cashless Economy

Canzoneri and Diba (2004) show that the Taylor principle is not a panacea for equilibrium determinacy in a model where bonds and money provide liquidity services to households. We consider a cashless variant of their model with two types of government bonds. One bond provides transaction services, whereas the other is used only as a store of value. We show that the Taylor principle is still sacrosant. In general, the results of Leeper (1991) are confirmed.

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Year of publication:	2008-08-11
Authors:	Marzo, Massimiliano ; Zagaglia, Paolo
Institutions:	Nationalekonomiska institutionen, Stockholms Universitet
Subject:	Monetary Policy \| Fiscal Policy \| Government Bonds \| Determinacy

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Extent:	application/pdf
Series:	Research Papers in Economics.
Type of publication:	Book / Working Paper
Language:	English
Notes:	The text is part of a series Research Papers in Economics Number 2008:7 28 pages
Classification:	C68 - Computable General Equilibrium Models ; E52 - Monetary Policy (Targets, Instruments, and Effects)
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005207069