Investment and interest rate policy: a discrete time analysis

This paper analyzes the restrictions necessary to ensure that the interest rate policy rule used by the central bank does not introduce local real indeterminacy into the economy. It conducts the analysis in a Calvo-style sticky price model. A key innovation is to add investment spending to the analysis. In this environment, local real indeterminacy is much more likely. In particular, all forward-looking interest rate rules are subject to real indeterminacy.

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Year of publication:	2003
Authors:	Carlstrom, Charles T. ; Fuerst, Timothy S.
Institutions:	Federal Reserve Bank of Cleveland
Subject:	Interest rates \| Monetary policy \| Banks and banking \| Central

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Extent:	application/pdf
Series:	Working Paper.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 0320
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005428330