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Super-inertial interest rate rules are not solutions of Ramsey optimal monetary policy

Jean-Bernard Chatelain () and Kirsten Ralf

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Abstract: Giannoni and Woodford (2003) found that the equilibrium determined by com- mitment to a super-inertial rule (where the sum of the parameters of lags of interest rate exceed ones and does not depend on the auto-correlation of shocks) corresponds to the unique bounded solution of Ramsey optimal policy for the new-Keynesian model. By contrast, this note demonstrates that commitment to an inertial rule (where the sum of the parameters of lags of interest rate is below one and depends on the auto-correlation of shocks) corresponds to the unique bounded solution.

Keywords: New-Keynesian model; Inertial rule; Super-inertial rule; Interest rate smoothing; Ramsey optimal policy (search for similar items in EconPapers)
Date: 2018-08
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01863367
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