Timing and real indeterminacy in monetary models

Charles Carlstrom and Timothy Fuerst

No 9910R, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: An increasingly common approach to the theoretical analysis of monetary policy ensures that a proposed policy does not introduce real indeterminacy?and thus sunspot fluctuations?into the model economy. Policy is typically conducted in terms of directives for the nominal interest rate. This paper uses a discrete-time, money-in-the-utility function model to demonstrate how seemingly minor modifications in the trading environment result in dramatic differences in the policy restrictions needed to ensure real determinacy. These differences arise because of the differing pricing equations for the nominal interest rate.

Keywords: Monetary; policy (search for similar items in EconPapers)
Date: 2001
New Economics Papers: this item is included in nep-dge and nep-mon
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Citations: View citations in EconPapers (179)

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Journal Article: Timing and real indeterminacy in monetary models (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwp:9910

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DOI: 10.26509/frbc-wp-199910R

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