Showing 1 - 10 of 22
This paper reconsiders a result obtained by Sargent and Wallace, namely, that price level indeterminacy obtains in their well-known model if the monetary authorities adopt a policy feedback rule for the interest rate rather than the money stock. Since the Federal Reserve seems often to have used...
Persistent link: https://www.econbiz.de/10013219724
Svensson (JEL, 2003) argues strongly that specific targeting rules first order optimality conditions for a specific objective function and model are normatively superior to instrument rules for the conduct of monetary policy. That argument is based largely upon four main objections to the latter...
Persistent link: https://www.econbiz.de/10013221112
A Keynesian idea of considerable historical importance is that, in the presence of a liquidity trap, a competitive economy may lack--despite price flexibility--automatic market mechanisms that tend to eliminate excess supplies of labor. The standard classical counterargument, which relies upon...
Persistent link: https://www.econbiz.de/10013223894
This paper discusses four current topics in monetary policy analysis, each of which hinges on the possibility of multiple solutions in rational expectations (RE) models. In three of these cases--involving inflation forecast targeting, the zero-lower bound deflation trap, and the fiscal theory of...
Persistent link: https://www.econbiz.de/10013227186
Recently it has been argued that a monetary policy of nominal income and targeting" would result in dynamically unstable processes for output and inflation. That results holds in a" theoretical model that includes backward-looking IS an Phillips curve relations rather special and theoretically...
Persistent link: https://www.econbiz.de/10013240953
This paper presents a prototype model for development of the fiscal theory of the price level.' In this simple setting, the fiscal theory's distinctiveness relies upon adoption of a bubble solution, rather than the rational-expectations fundamentals solution. The paper then shows that the fiscal...
Persistent link: https://www.econbiz.de/10013136352
This paper explores the relationship between the closely linked concepts of E-stability and least-squares learnability, featured in recent work by Evans and Honkapohja (1999, 2001), and the minimum-state-variable (MSV) solution defined by McCallum (1983) and used by many researchers for rational...
Persistent link: https://www.econbiz.de/10013136353
In analyses of "liquidity trap" problems associated with the zero lower bound (ZLB) on nominal interest rates, it is important to emphasize the difference between policy rule changes, intended to help escape an existing ZLB situation, and maintained policy rules designed so as to avoid ZLB...
Persistent link: https://www.econbiz.de/10013100640
Linear RE models typically possess a multiplicity of solutions. Consider, however, the requirement that the solution coefficients must not be infinitely discontinuous in the model's structural parameters. In particular, we require that the solutions should be continuous in the limit as those...
Persistent link: https://www.econbiz.de/10013101811
<script type="text/javascript" src="https://cdnjs.cloudflare.com/ajax/libs/mathjax/2.7.1/MathJax.js?config=AM_HTMLorMML-full"></script>Consider a rational expectations (RE) model that includes a relationship between variables `x_t` and `z_(t+1)`. To be considered structural and potentially useful as a guide to actual behavior, this model must specify whether `x_t` is influenced by the expectation at t of `z_(t+1)` or,...
Persistent link: https://www.econbiz.de/10013151380