Monetary Policy and Multiple Equilibria

Jess Benhabib (), Stephanie Schmitt-Grohe () and Martin Uribe

Working Papers from C.V. Starr Center for Applied Economics, New York University

Abstract: In this paper, we characterize conditions under which interest rate feedback rules wherby the nominal interest rate is set as an increasing function of the inflation rate generate multiple equilibria. We show that these conditions depend not only on the fiscal regime (as emphasized in the fiscal theory of the price level) but also on the way in which money is assumed to enter preferences and technology. We analyze this issue in flexible and sticky price environments.

Keywords: MONETARY POLICY; PRICES; INTEREST RATE (search for similar items in EconPapers)
JEL-codes: E31 E52 E63 (search for similar items in EconPapers)
Date: 1998
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Related works:
Working Paper: Monetary Policy and Multiple Equilibria (1999)
Working Paper: Monetary policy and multiple equilibria (1998)
Working Paper: Monetary Policy and Multiple Equilibria (1999)
Journal Article: Monetary Policy and Multiple Equilibria (2001)
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