We propose a new interest rate rule that implements the optimal equilibrium and eliminates all indeterminacy in a …

principle in one regime does not necessarily cause indeterminacy. Second, very different responses to inflation may trigger … indeterminacy even if both regimes satisfy the Taylor principle. Determinacy thus results from the adequacy between monetary regimes …

remains indeterminacy indexed by an arbitrary probability measure over the set of states of the world. With an interest rate … policy, and only if the asset market is complete, indeterminacy is nominal: it affects prices, but not the allocation of … resources at equilibrium; with a money-supply policy, the indeterminacy is real. Portfolio policy sets the portfolio of assets …

We propose a new interest rate rule that implements the optimal equilibrium and eliminates all indeterminacy in a …