Interest rate rules and global determinacy: An alternative to the Taylor principle

Abstract : A well-known determinacy condition on interest rate rules is the "Taylor principle," which states that nominal interest rates should respond more than 100 percent to inflation. Unfortunately, notably because interest rates must be positive, the Taylor principle cannot be satisfied for all interest rates, and as a consequence global determinacy may not prevail even though there exists a locally determinate equilibrium. We propose here a simple alternative to the Taylor principle, which takes the form of a new condition on interest rate rules that ensures global determinacy. An important feature of the policy package is that it does not rely at all on any of the fiscal policies associated with the "fiscal theory of the price level," which has so far been the main alternative for determinacy.
Type de document :
Article dans une revue
International Journal of Economic Theory, Wiley, 2009, 5 (4), pp.359-374. 〈10.1111/j.1742-7363.2009.00114.x〉
Liste complète des métadonnées

https://hal-pjse.archives-ouvertes.fr/halshs-00754322
Contributeur : Caroline Bauer <>
Soumis le : mardi 20 novembre 2012 - 08:54:48
Dernière modification le : mardi 24 avril 2018 - 17:20:09

Lien texte intégral

Identifiants

Collections

Citation

Jean-Pascal Bénassy. Interest rate rules and global determinacy: An alternative to the Taylor principle. International Journal of Economic Theory, Wiley, 2009, 5 (4), pp.359-374. 〈10.1111/j.1742-7363.2009.00114.x〉. 〈halshs-00754322〉

Partager

Métriques

Consultations de la notice

215