Determinacy of interest rate rules with bond transaction services in a cashless economy

Massimiliano Marzo and Paolo Zagaglia

No 24/2008, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: Canzoneri and Diba (2004) show that the Taylor principle is not a panacea for equilibrium determinacy in a model where bonds and money provide liquidity services to households. We consider a cashless New Keynesian model with two types of government bonds. One bond provides transaction services, whereas the other is used only as a store of value. We show that the Taylor principle is still sacrosanct, and that the results of Leeper (1991) are confirmed.

Keywords: monetary policy; fiscal policy; government bonds; determinacy (search for similar items in EconPapers)
JEL-codes: C68 E52 (search for similar items in EconPapers)
Date: 2008
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Working Paper: Determinacy of Interest Rate Rules with Bond Transaction Services in a Cashless Economy (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:rdp2008_024

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