Price Indeterminacy Reinvented: Pegging Interest Rates While Targeting Prices, Inflation, or Nominal Income

David Eagle ()

Macroeconomics from EconWPA

Abstract: Contrary to Sargent and Wallace (1975), a central bank’s use of an interest-rate instrument does determine prices when the central bank pursues either a short-term or long-term price target. However, in order for a central bank’s pursuit of a long-term price target to be credible, the public still needs something like a Taylor or McCallum-Woodford rule. The use of an interest-rate instrument also determines prices when the central bank targets nominal income in either the short-term or long-term. However, if the central bank targets interest rates in the short term with a long-term inflation target, then prices are indeterminate.

Keywords: price indeterminancy; pegging interest rates; inflation targeting; nominal-income targeting; nominal-aggregate-demand targeting; price-level targeting (search for similar items in EconPapers)
JEL-codes: E (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2005-01-20
Note: Type of Document - pdf; pages: 30
View list of references View citations in EconPapers

Downloads: (external link)
http://129.3.20.41/eps/mac/papers/0501/0501028.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:wpa:wuwpma:0501028

Access Statistics for this paper

More papers in Macroeconomics from EconWPA
Series data maintained by EconWPA ().