Interest rate pass-through, monetary policy rules and macroeconomic stability

Claudia Kwapil and Johann Scharler

Journal of International Money and Finance, 2010, vol. 29, issue 2, 236-251

Abstract: In this paper we analyze equilibrium determinacy in a sticky price model in which the pass-through from policy rates to retail interest rates is sluggish and potentially incomplete. In addition, we empirically characterize and compare the interest rate pass-through process in the euro area and the U.S. We find that if the pass-through is incomplete in the long run, the standard Taylor principle is insufficient to guarantee equilibrium determinacy. Our empirical analysis indicates that this result might be particularly relevant for bank-based financial systems as for instance that in the euro area.

Keywords: Interest; rate; pass-through; Interest; rate; rules; Equilibrium; determinacy; Stability (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (64)

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Related works:
Working Paper: Interest Rate Pass-Through, Monetary Policy Rules and Macroeconomic Stability (2007)
Working Paper: Interest Rate Pass-Through, Monetary Policy Rules and Macroeconomic Stability (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:29:y:2010:i:2:p:236-251

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