Monetary Policy Analysis: An Undergraduate Toolkit

Jagjit S. Chadha ()

Studies in Economics from Department of Economics, University of Kent

Abstract: We develop simple diagrams that can be used by undergraduates to understand interest rate setting by policy- makers. We combine an inflation target, Fisher equation, policy reaction function and short and long run aggregate supply analysis to give a depiction of the policy problem. We illustrate the appropriate response by the policy maker to each of a positive shock to demand, a negative supply shock and dislodged inflation expectations. We also illustrate the problems of a zero bound for policy rates within this framework and consider the role of an interest rate rule in offsetting money market perturbations. Some key readings are introduced.

Keywords: Interest rate setting; monetary policy; zero-bound; money markets (search for similar items in EconPapers)
JEL-codes: E42 E52 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: Written
View list of references

Downloads: (external link)
ftp://ftp.ukc.ac.uk/pub/ejr/RePEc/ukc/ukcedp/0815.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ukc:ukcedp:0815

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Studies in Economics from Department of Economics, University of Kent
Address: Department of Economics, University of Kent at Canterbury, Canterbury, Kent, CT2 7NP
Series data maintained by Emma Robinson ().