Backward- versus Forward-Looking Feedback Interest Rate Rules

Hippolyte d'Albis, Emmanuelle Augeraud-Véron () and Hermen Jan Hupkes ()
Additional contact information
Emmanuelle Augeraud-Véron: MIA - Université de la Rochelle
Hermen Jan Hupkes: Department of Mathematics - University of Missouri - Columbia, https://www.math.missouri.edu/
Authors registered in the RePEc Author Service: Emmanuelle Augeraud-Véron

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: This paper proposes conditions for the existence and uniqueness of solutions to systems of differential equations with delays or advances in which some variables are non-predetermined. An application to the issue of optimal interest rate policy is then develop in a flexible-price model where money enters the utility function. Central banks have the choice between a rule that depends on past inflation rates or one that depends on predicted interest rates. When inflation rates are selected over a bounded time interval, the problem is characterized by a system of delay or advanced differential equations. We then prove that if the central bank's forecast horizon is not too long, an active and forward-looking monetary policy is not too destabilizing: the equilibrium trajectory is unique and monotonic

Keywords: Interest rate rules; indeterminacy; functionnal differential equations (search for similar items in EconPapers)
JEL-codes: E21 E52 E63 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2012-06
New Economics Papers: this item is included in nep-cba and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://mse.univ-paris1.fr/pub/mse/CES2012/12051.pdf (application/pdf)

Related works:
Working Paper: Backward- versus Forward-Looking Feedback Interest Rate Rules (2012)
Working Paper: Backward- versus Forward-Looking Feedback Interest Rate Rules (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:12051

Access Statistics for this paper

More papers in Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne Contact information at EDIRC.
Bibliographic data for series maintained by Lucie Label ().