We consider a standard cash in advance monetary model with flexible prices or prices set in advance and show that there are interest rate or money supply rules such that equilibria are unique. The existence of these single instrument rules depends on whether the economy has an infinite horizon...

What instruments of monetary policy must be used in order to implement a unique equilibrium? This paper revisits the issues addressed by Sargent and Wallace (1975) on the multiplicity of equilibria when policy is conducted with interest rate rules. We show that the appropriate interest rate...

In this paper, we derive principles of optimal cyclical monetary policy in an economy without capital, with a cash-in-advance restriction on household transactions, and with monopolistic firms that set prices one period in advance. The only distortionary policy instruments are the nominal...

Under a monetary policy rule for the nominal interest rate, i.e. the return on risk-free short-term nominal bonds, there may be a unique local equilibrium, but there are in general multiple global equilibria. We show that the appropriate interest rate instruments under uncertainty are...

Can both short and long-term interest rates be targeted independently? Can the target of the term structure help solve the problem of multiplicity of equilibria that occurs when only the short rate is targeted? Both questions are addressed, and the answer is yes to both.

In this paper, we derive principles of optimal cyclical monetary policy in an economy without capital, with a cash-in-advance restriction on household transactions, and monopolistic firms that set prices one period in advance. The only distortionary policy instruments are the nominal interest...

It is believed that a common monetary policy in a monetary union will have identical effects on different countries as long as these countries have identical fundamentals. We show that, when there is specialization in production, the terms of trade react to the shock. The transmission mechanism...

We derive principles of optimal short run monetary policy in a real business cycles model, with money and with monopolistic firms that set prices one period in advance. The only distortionary policy intruments are the nominal interest rates and the money supplies. In this environment it is...

We consider standard cash-in-advance monetary models and show that there are interest rate or money supply rules such that equilibria are unique. The existence of these single instrument rules depends on whether the economy has an infinite horizon or an arbitrarily large but finite horizon.