Equilibrium Indeterminacy under Forward-Looking Interest Rate Rules

Why is the rational expectations equilibrium locally indeterminate if the central bank raises the nominal interest rate too actively in response to a rise in expected inflation? This is because although the bank succeeds in stabilizing the expectations of the future economy, it allows the current economy to arbitrarily fluctuate. This indeterminacy expands in dimension as the forecast horizon of the rule becomes long

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Year of publication:	2010
Authors:	Nakagawa, Ryuichi
Publisher:	[2010]: [S.l.] : SSRN
Subject:	Gleichgewichtsmodell \| Equilibrium model \| Zinspolitik \| Interest rate policy \| Rationale Erwartung \| Rational expectations \| Inflationserwartung \| Inflation expectations \| Prognose \| Forecast \| Theorie \| Theory

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Extent:	1 Online-Ressource (16 p)
Series:	Kansai University Working Paper ; No. F-39
Type of publication:	Book / Working Paper
Language:	English
Notes:	Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 15, 2009 erstellt
Other identifiers:	10.2139/ssrn.1549541 [DOI]
Classification:	C62 - Existence and Stability Conditions of Equilibrium ; E47 - Forecasting and Simulation ; E52 - Monetary Policy (Targets, Instruments, and Effects)
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10013148052