This paper discusses four current topics in monetary policy analysis, each of which hinges on the possibility of multiple solutions in rational expectations (RE) models. In three of these cases-involving inflation forecast targeting, the zero-lower bound deflation trap, and the fiscal theory of...

For introductory presentation of issues involving identification and estimation of simultaneous equation systems, a natural vehicle is a model consisting of supply and demand relationships to explain price and quantity variables for a single good. One would accordingly expect to find in...

This paper considers the possibility that, in linear rational expectations (RE) models, all determinate (uniquely non-explosive) solutions coincide with the minimum state variable (MSV) solution, which is unique by construction. In univariate specifications of the form y(t) = AE(t)y(t+1) +...

Much recent analysis of international monetary and fiscal policy issues, such as the choice of an exchange-rate regime or the design of a policy coordination scheme, has been conducted by stochastic simulations with multicountry econometric models. In these studies it has become standard...

This paper assesses the performance of a simple monetary policy rule - McCallum's rule. This rule targets nominal income using the monetary base as its instrument whilst making an allowance for any on-going changes in money velocity. The paper conducts a range of historical counterfactual...

This paper concerns the minimal-state-variable (MSV) criterion for selection among solutions in rational expectationsmodels that feature a multiplicity of paths that satisfy all of the model's conditions. It compares the MSVcriterion with others, including the widely used saddle-path (dynamic...

This paper considers whether "liquidity trap" issues have important bearing on the desirability of inflation targeting as a strategy for monetary policy. From a theoretical perspective, it has been suggested that "expectation trap" and "indeterminacy" dangers are created by variants of inflation...

Both academic thinking about monetary economics and the practice of monetary policy have changed dramatically since 1971-3, when the rational expectations revolution was beginning and the Bretton Woods system was crumbling. The present paper considers whether the various changes that have taken...