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Is Forward-Looking Inflation Targeting Destabilizing? The Role of Policy's Response to Current Output under Endogenous Investment

Huang, Kevin X.D.; Meng, Qinglai - Vanderbilt University Department of Economics - 2007

in response solely to future inflation induce real indeterminacy of equilibrium. Applying the Samuelson … by itself has a quantitatively negligible effect and almost all strict inflation-targeting rules lead to indeterminacy … stickiness, indeterminacy is much less likely to occur as policy also responds to output. With estimated labor supply elasticity …

Persistent link: https://www.econbiz.de/10005178568

Generalizing the Taylor Principle

Davig, Troy; Leeper, Eric M. - Center for Applied Economics and Policy Research … - 2006

periods when the Taylorprinciple is not satisfied, not because of indeterminacy, but because monetary policy amplifies the …

Persistent link: https://www.econbiz.de/10005687188

How to avoid the consequences of anticipated monetary policies

Gersbach, Hans - In: Economic Theory 14 (1999) 3, pp. 729-740

This paper analyzes how monetary policy in an overlapping generations model can be designed to avoid inflationary consequences of anticipated changes of monetary policies. Avoiding these inflationary consequences will require a once and for all increase (decrease) in monetary growth immediately...

Persistent link: https://www.econbiz.de/10005596786

The Natural Rate Hypothesis and Real Determinacy

Meyer-Gohde, Alexander - Sonderforschungsbereich 649: Ökonomisches Risiko, … - 2008

The uniqueness of bounded local equilibria under interest rate rules is analyzed in a model with sticky information `a la Mankiw and Reis (2002). The main results are tighter bounds on monetary policy than in sticky-price models, irrelevance of the degree of output-gap targeting for determinacy,...

Persistent link: https://www.econbiz.de/10005652783

Bounded interest rate feedback rules in continuous-time

d'Albis, Hippolyte; Augeraud-Véron, Emmanuelle; … - In: Journal of Economic Dynamics and Control 39 (2014) C, pp. 227-236

This paper analyzes the dynamic consequences of interest rate feedback rules in a flexible-price model where money enters the utility function. Two alternative rules are considered based on past or predicted inflation rates. The main feature is to consider inflation rates that are selected over...

Persistent link: https://www.econbiz.de/10010744195

Increasing returns and unsynchronized wage adjustment in sunspot models of the business cycle

Huang, Kevin X.D.; Meng, Qinglai - In: Journal of Economic Theory 147 (2012) 1, pp. 284-309

A challenge to models of equilibrium indeterminacy based on increasing returns is that required increasing returns for … generating indeterminacy can be implausibly large and rise quickly with the relative risk aversion in labor. We show that … unsynchronized wage adjustment via a relative wage effect can both lower the required degree of increasing returns for indeterminacy …

Persistent link: https://www.econbiz.de/10010582581

Generalizing the Taylor Principle: New Comment.

Barthélemy, J.; Marx, M. - Banque de France - 2012

In this paper, we provide determinacy conditions, i.e. conditions ensuring the existence and uniqueness of a bounded solution, in a purely forward-looking linear Markov switching rational expectations model. We thus settle the debate between Davig and Leeper (2007) and Farmer et al. (2010). The...

Persistent link: https://www.econbiz.de/10010585703

Monetary Policy Indeterminacy and Identification Failures in the US: Results from a Robust Test

Castelnuovo, Efrem; Fanelli, Luca - Dipartimento di Scienze Economiche "Marco Fanno", … - 2013

indeterminacy if the OR are not rejected. We investigate the finite sample performance of the suggested two-steps testing strategy … formal support to the hypothesis of a switch from indeterminacy to uniqueness occurred in the late 1970s. …

Persistent link: https://www.econbiz.de/10011156745

Monetary Policy Indeterminacy and Identification Failures in the U.S.: Results from a Robust Test

Castelnuovo, Efrem; Fanelli, Luca - Dipartimento di Scienze Economiche "Marco Fanno", … - 2014

-type test for the orthogonality restrictions (OR) implied by the system of Euler equations. The hypothesis of indeterminacy and … ModerationÓ period, our results offer formal support to the hypothesis of a switch from indeterminacy to a scenario consistent …

Persistent link: https://www.econbiz.de/10011123415

When the Taylor principle is insufficient - A benchmark for the fiscal theory of the price level in a monetary union

Brede, Maren - Sonderforschungsbereich 649: Ökonomisches Risiko, … - 2014

This paper derives restrictions on monetary and fiscal policies for determinate equilibria in a two-country monetary union with autarkic members. It finds that a central bank following the Taylor principle may not be sufficient for determinacy unless accompanied by one 'active' fiscal authority...

Persistent link: https://www.econbiz.de/10011097003