An Analytical Solution for the Interest Rate Reaction Function in a Neo- Keynesian Economy Using the Undetermined Coefficients Method

In this research note I propose the use of the undetermined coefficients method as an alternative approach to solve the Central Bank optimization problem in a neo-keynesian economy. The advantage of using this method is that it provides a theory as to how rational expectations are constructed, and how shocks in the economy are propagated, in order to find an analytical solution for the interest rate reaction function in an economy with a forward-looking behavior.

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Year of publication:	2007-12-01
Authors:	Arend, Mario

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Type of publication:	Book / Working Paper
Language:	English
Notes:	Arend, Mario (2007): An Analytical Solution for the Interest Rate Reaction Function in a Neo- Keynesian Economy Using the Undetermined Coefficients Method.
Classification:	E43 - Determination of Interest Rates; Term Structure Interest Rates ; E52 - Monetary Policy (Targets, Instruments, and Effects) ; C61 - Optimization Techniques; Programming Models; Dynamic Analysis
Source:	BASE

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