The Perils of Taylor Rules
Copyright policy )The Perils of Taylor Rules
The authors study effects on an economy of active interest rate feedback rules, i.e. the rules that respond to increases in inflation with a more than one-to-one increase in the nominal interest rate. They showed that the intended steady state at which monetary policy is active may be unstable and typically there exists saddle connections leading the system to a liquidity trap, i.e. a steady state in which the nominal interest rate is near zero. Two kinds of time-continuous models are used in the paper: a simple flexible-price economy and a model with price stickiness.
- King’s University United States
- New York University United States
- Columbia University United States
- University of Pennsylvania United States
- Economic Policy Institute United States
Interest rate feedback rules, ddc:330, sticky-price model, Microeconomic theory (price theory and economic markets), interest rates, Finance etc., Interest rate feedback rules; liquidity traps; multiple equilibria; zero bound on nominal rates;, interest rate feedback rules; zero bound on nominal rates; liquidity traps; multiple equilibria, Interest Rate Feedback Rules; Liquidity Trap; Zero Bound On Nominal Interest Rates, liquidity traps, Economic growth models, multiple equilibria, zero bound on nominal rates, Taylor rules, E52, E63, E31, jel: jel:E52, jel: jel:E63, jel: jel:E31
Interest rate feedback rules, ddc:330, sticky-price model, Microeconomic theory (price theory and economic markets), interest rates, Finance etc., Interest rate feedback rules; liquidity traps; multiple equilibria; zero bound on nominal rates;, interest rate feedback rules; zero bound on nominal rates; liquidity traps; multiple equilibria, Interest Rate Feedback Rules; Liquidity Trap; Zero Bound On Nominal Interest Rates, liquidity traps, Economic growth models, multiple equilibria, zero bound on nominal rates, Taylor rules, E52, E63, E31, jel: jel:E52, jel: jel:E63, jel: jel:E31
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