The aim of this paper is to solve the inconsistency problem à la Barro and Gordon within a New Keynesian model and to derive time-consistent (stable) interest rate rules of Taylor-type. We find a multiplicity of stable rules. In contrast to the Kydland/Prescott-Barro/Gordon approach,...

Since the publication of Keynes' "General Theory of Employment, Interest, and Money" in 1936 many new ideas and solution concepts for macroeconomic problems emerged, disappeared, and were combined in order to appropriately describe macroeconomic phenomena. Nowadays, New Keynesian frameworks are...

The aim of this paper is to solve the inconsistency problem a la Barro and Gordon within a New Keynesian model and to derive time-consistent (stable) interest rate rules of Taylor-type. We find a multiplicity of stable rules. In contrast to the Kydland/Prescott-Barro/Gordon approach,...