The Natural Rate Hypothesis and Real Determinacy

The uniqueness of bounded local equilibria under interest rate rules is analyzed in a model with sticky information à la Mankiw and Reis (2002). The main results are tighter bounds on monetary policy than in sticky-price models, irrelevance ofthe degree of output-gap targeting for determinacy, independence of determinacy regions from parameters outside the interest-rate rule, and equivalence between realdeterminacy in models satisfying the natural rate hypothesis and nominal determinacy in the associated full-information, flex-price equivalent. The analysis follows from boundedness considerations on the nonautonomous recursion that describe the MA(inf) representation of variables’ reaction to endogenous fluctuations.