Stability of steady states in a model of pleasant monetarist arithmetic

Marco Espinosa-Vega () and Steven Russell

No 2001-20, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: In this paper the authors study the stability properties of the alternative steady-state equilibria that arise in a neoclassical production model that delivers pleasant monetarist arithmetic. They show that if the government?s monetary policy rule involves a fixed money supply growth rate, then ?pleasant arithmetic? steady states?steady states from which a permanent increase in the money growth and inflation rates is associated with a permanent decrease in the real interest rate and a permanent increase in the level of output?are dynamically stable.

Keywords: Econometric models; Monetary policy (search for similar items in EconPapers)
Date: 2001
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