Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
10474390 | Journal of Economic Theory | 2005 | 17 Pages |
Abstract
This paper analyzes the restrictions necessary to ensure that the interest rate policy rule used by the central bank does not introduce local real indeterminacy into the economy. It conducts the analysis in a Calvo-style sticky price model. A key innovation is to add investment spending to the analysis. In this environment, local real indeterminacy is much more likely. In particular, all forward-looking interest rate rules are subject to real indeterminacy.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Charles T. Carlstrom, Timothy S. Fuerst,