McKnight, Stephen; Mihailov, Alexander - Centro de Estudios Económicos, Colegio de México - 2012
-Wicksellian model that incorporates real balance effects. We show that in closed economies the presence of small, empirically plausible … real balance effects significantly restricts the ability of the Taylor principle to prevent indeterminacy of the rational … exchange rate are introduced into the policy rule, thereby suggesting that the widespread neglect of real balance effects in …