We propose a new interest rate rule that implements the optimal equilibrium and eliminates all indeterminacy in a canonical New Keynesian model in which the zero lower bound on nominal interest rates (ZLB) is binding. The rule commits to zero nominal interest rates for a length of time that...

I give necessary and sufficient conditions under which interest-rate feedback rules eliminate aggregate instability by inducing a globally unique optimal equilibrium in a canonical New Keynesian economy with a binding zero lower bound. I consider a central bank that initially keeps interest...

After the recent financial crisis of 2007, a connection between monetary policy and financial stability has started to be thoroughly investigated. One of the particular areas of this research field deals with the role of various financial variables in the monetary policy rules. The main purpose...

This paper investigates the identification, the determinacy and the stability of ad hoc, "quasi-optimal" and optimal policy rules augmented with financial stability indicators (such as asset prices deviations from their fundamental values) and minimizing the volatility of the policy interest...

This article compares two types of monetary policy rules - the Taylor-Rule and the Orphanides-Rule - with respect to their forecasting properties for the policy rates of the European Central Bank. In this respect the basic rules, results from estimated models and augmented rules are compared....

This article compares two types of monetary policy rules - the Taylor-Rule and the Orphanides-Rule - with respect to their forecasting properties for the policy rates of the European Central Bank. In this respect the basic rules, results from estimated models and augmented rules are compared....

We examine the evolution of monetary policy rules in a group of inflation targeting countries (Australia, Canada, New Zealand, Sweden and the United Kingdom), applying a moment-based estimator in a time-varying parameter model with endogenous regressors. Using this novel flexible framework, our...

This paper shows that the monetary policy paradigm that was in place before the financial crisis worked very well and that the crisis occurred only after policy makers deviated from that paradigm. The paper also evaluates monetary policy during the financial crisis by dividing the crisis into...

We introduce a novel method for estimating a monetary policy rule using macroeconomic news. Market forecasts of both economic conditions and monetary policy are affected by news, and our estimation links the two effects. This enables us to estimate directly the policy rule agents use to form...

This paper makes an empirical comparison of two simple monetary policy rules, the McCallum rule and the Taylor rule and uses them to assess the monetary policy stance of the ECB during the financial crisis. After the Taylor rule, the McCallum rule ranks among the most widely analysed nominal...