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Policy interaction, expectations and the liquidity trap

Evans, George W.; Honkapohja, Seppo - EconWPA - 2004

In this paper we consider inflation and government debt dynamics when monetary policy employs a global interest rate … interest rate rules are known to imply the existence of a second, low inflation steady state, below the target inflation rate … this low inflation steady state and is driven to an even lower inflation floor which, in turn, is supported by a switch to …

Persistent link: https://www.econbiz.de/10005561331

Adaptive learning and monetary policy design

Evans, George W.; Honkapohja, Seppo - EconWPA - 2004

We review the recent work on interest rate setting, which emphasizes the desirability of designing policy to ensure stability under private agent learning. Appropriately designed expectations based rules can yield optimal rational expectations equilibria that are both determinate and stable...

Persistent link: https://www.econbiz.de/10005561354

Friedman’s money supply rule vs optimal interest rate policy

Evans, George W.; Honkapohja, Seppo - EconWPA - 2004

Using New Keynesian models, we compare Friedman’s k-percent money supply rule to optimal interest rate setting, with respect to determinacy, stability under learning and optimality. We first review the recent literature. Open-loop interest rate rules are subject to indeterminacy and...

Persistent link: https://www.econbiz.de/10005126422