Unique monetary equilibria with interest rate rules: An extension

Kent P. Kimbrough

Economics Letters, 2012, vol. 114, issue 3, 332-334

Abstract: In a recent paper, Adão et al. (2011), using a cash-in-advance framework, derive an interest rate rule that results in a unique monetary equilibrium. The resulting interest rate rule is forward looking and the interest rate responds positively to forecasts of future real activity and to forecasts of the future price level. This paper extends their approach to a transactions cost environment. The resulting interest rate rule has the added feature that, in line with previous studies, the nominal interest rate responds positively to forecasts of future inflation.

Keywords: Monetary policy; Interest rate rules; Uniqueness (search for similar items in EconPapers)
JEL-codes: E31 E40 E52 E58 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:114:y:2012:i:3:p:332-334

DOI: 10.1016/j.econlet.2011.11.014

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