Firm-Specific Investment, Sticky Prices, and the Taylor Principle

Tommy Sveen () and Lutz Weinke ()
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Lutz Weinke: Universitat Pompeu Fabra

No 2004/12, Working Paper from Norges Bank

Abstract: According to the Taylor principle a central bank should adjust the nominal interest rate by more than one for one in response to changes in current in?ation. Most of the existing literature supports the view that by following this simple recommendation a central bank can avoid being a source of unnecessary fluctuations in economic activity. The present paper shows that this conclusion is not robust with respect to the modelling of capital accumulation. We use our insights to discuss the desirability of alternative arrangements for the conduct of monetary policy.

Keywords: international banking; portfolio diversification; international integration (search for similar items in EconPapers)
JEL-codes: E22 E31 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2004-09-10
New Economics Papers: this item is included in nep-mon
Note: Forthcoming in Journal of Economic Theory
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Firm-specific investment, sticky prices and the Taylor principle (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2004_12

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