This paper examines the implications for equilibrium determinacy of forward-looking monetary policy rules in a Neo-Wicksellian model that incorporates real balance effects. We show that in closed economies the presence of small, empirically plausible real balance effects significantly restricts...

Should central banks target producer price inflation or consumer price inflation in the setting of monetary policy? Previous studies suggest that in order to avoid real indeterminacy and self-fulfilling fluctuations, the interest rate rule for open economies should react to producer price...

This paper analyses the necessary and sufficient conditions to ensure that interest rate policy does not introduce real indeterminacy and thus self-fulfilling fluctuations into open economies. A key feature of the model is the incorporation of capital and investment spending into the analysis....