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The Optimal Inflation Target and the Natural Rate of Interest
Andrade, Philippe - 2018
We study how changes in the value of the steady-state real interest rate affect the optimal inflation target, both in …-for-one: increases in the optimal inflation rate are generally lower than declines in the steady-state real interest rate. Our approach … allows us not only to assess the uncertainty surrounding the optimal inflation target, but also to determine the latter while …
Persistent link: https://www.econbiz.de/10012927026
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Monetary Policy with Interest on Reserves
Cochrane, John H. - 2014
determine inflation in this regime, so I base the analysis on the fiscal theory of the price level. I find that monetary policy … can peg the nominal rate, and determine expected inflation. With sticky prices, monetary policy can also affect real … interest rates and output, though higher interest rates raise output and then inflation. The conventional sign requires a …
Persistent link: https://www.econbiz.de/10013044987
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Some Issues Concerning Interest Rate Pegging, Price Level Determinacy, and the Real Bills Doctrine
McCallum, Bennett T. - 2021
In a recent paper, Canzoneri, Henderson, and Rogoff have shown that it is possible for the monetary authority to peg the nominal interest rate without creating price level indeterminacy in a simplified version of the 1975 Sargent-Wallace model. The present paper begins by reviewing that result,...
Persistent link: https://www.econbiz.de/10013219333
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Price Level Determinacy with an Interest Rate Policy Rule and Rational Expectations
McCallum, Bennett T. - 2021
This paper reconsiders a result obtained by Sargent and Wallace, namely, that price level indeterminacy obtains in their well-known model if the monetary authorities adopt a policy feedback rule for the interest rate rather than the money stock. Since the Federal Reserve seems often to have used...
Persistent link: https://www.econbiz.de/10013219724
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Real Interest, Money Surprises and Anticipated Inflation
Makin, John H. - 2021
This paper investigates the hypothesis that surprise changes in the money supply and anticipated inflation (the Mundell … surprises and expected real interest or an inverse relationship between anticipated inflation and expected real interest. These …
Persistent link: https://www.econbiz.de/10013211690
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Can a Lender of Last Resort Stabilize Financial Markets? Lessons from the Founding of the Fed
Bernstein, Asaf - 2008
We use the founding of the Federal Reserve as a historical experiment to provide some insight into whether a lender of last resort can stabilize financial markets. Following the Panic of 1907, Congress passed two measures that established a lender of last resort in the United States: (1) the...
Persistent link: https://www.econbiz.de/10012769641
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Forward Guidance
Hagedorn, Marcus - 2018
We assess the power of forward guidance—promises about future interest rates—as a monetary tool in a liquidity trap using a quantitative incomplete-markets model. Our results suggest the effects of forward guidance are negligible. A commitment to keep future nominal interest rates low for a...
Persistent link: https://www.econbiz.de/10012921508
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Forward Guidance
Svensson, Lars E. O. - 2014
Forward guidance about future policy settings, in the form of a published policy-rate path, has for many years been a natural part of normal monetary policy for several central banks, including the Reserve Bank of New Zealand and the Swedish Riksbank. More recently, the Federal Reserve has...
Persistent link: https://www.econbiz.de/10013039629
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Pride Goes Before a Fall : Federal Reserve Policy and Asset Markets
Reinhart, Carmen M. - 2011
that modest alterations to monetary policy have vast consequences is inconsistent with theory and not supported by evidence …
Persistent link: https://www.econbiz.de/10013129137
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Negative Nominal Interest Rates : Three Ways to Overcome the Zero Lower Bound
Buiter, Willem H. - 2010
The paper considers three methods for eliminating the zero lower bound on nominal interest rates and thus for restoring symmetry to domain over which the central bank can vary its policy rate. They are: (1) abolishing currency (which would also be a useful crime-fighting measure); (2) paying...
Persistent link: https://www.econbiz.de/10013152378