We develop simple diagrams that can be used by undergraduates to understand interest rate setting by policy-makers. We combine an inflation target, Fisher equation, policy reaction function and short and long run aggregate supply analysis to give a depiction of the policy problem. We illustrate...

We develop simple diagrams that can be used by undergraduates to understand interest rate setting by policy-makers. We combine an inflation target, Fisher equation, policy reaction function and short and long run aggregate supply analysis to give a depiction of the policy problem. We illustrate...

The financial crisis has led to the development of an active debate on the use of macro-prudential instruments for regulating the banking system, in particular for liquidity and capital holdings. Within the context of a micro-founded macroeconomic model, we allow commercial banks to choose their...