In this paper, we analyze the relation between interest rate targets and money supply in a (bubble-free) rational expectations equilibrium of a standard cash-in-advance model. We examine lump-sum injections of money aimed to implement interest rate sequences that satisfy interest rate target...

Poland edged towards hyperinflation towards the latter half of 1989,but inflation fell dramatically after drastic reformswere enacted in January of 1990. We analyse the consistency betweenfiscal deficits and inflation targets and assessPoland's domestic and foreign debt management policies and...

We study the consequences of non-neutrality of government debt for macroeconomic stabilization policy in an environment where prices are sticky. Assuming transaction services of government bonds, Ricardian equivalence fails because public debt has a negative impact on its marginal rate of return...

We develop a macroeconomic framework where money issupplied against only few eligible securities in open marketoperations. The relationship between the policy rate,expected inflation and consumption growth is affected bymoney market conditions, i.e. the varying liquidity value ofeligible assets...

Federal Reserve nonborrowed reserve supply systematically responded to changes in inflation and in the output gap over the period 1969-2000. While the feedback from output gap is always negative, the response of money supply to changes in inflation varies considerably across time. Nonborrowed...

As both the natural level of output and the New Keynesian output gap cannot be observed in practice, there is quite some debate on the question how these variables look like in practice. Rather than taking the standard approach of using a time trend or the HP-filter to obtain estimates of these...

This paper examines the role of the monetary instrument choice for local equilibrium determinacy under sticky prices and different fiscal policy regimes. Corresponding to Benhabib et al.'s (2001) results for interest rate feedback rules, the money growth rate should not rise by more than one for...

This paper examines monetary policy implementation in a sticky price model. The central bank's plan under discretionary optimization is entirely forward-looking and exhibits multiple equilibrium solutions if transactions frictions are not negligibly small. The central bank can then implement...

Keynesian theory predicts output responses upon a fiscal expansion in a small open economy to be larger under fixed than floating exchange rates. We analyse the effects of fiscal expansions using a New Keynesian model and find that the reverse holds in the presence of sovereign default risk. By...

The stability of the demand for real Ml in Indonesia is empirically examinedusing quarterly data between 1981 and 2002. A cointegrated VAR methodology thatisolates the period of structural breaks in the data generating process of the variables,caused by the Asian crisis, is used. The results...