Investment and interest rate policy: a discrete time analysis

Charles T. Carlstrom and Timothy S. Fuerst ()

No 320, Working Paper from Federal Reserve Bank of Cleveland

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.

Keywords: Interest rates; Monetary policy; Banks and banking, Central (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2003
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Related works:
Journal Article: Investment and interest rate policy: a discrete time analysis (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:fip:fedcwp:0320

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