Interest Rate Control Rules and Macroeconomic Stability in a Heterogeneous Two-Country Model

Seiya Fujisaki

MPRA Paper from University Library of Munich, Germany

Abstract: We analyze relations between several types of interest rate control rules and equilibrium determinacy using a two-country model featuring preference and production parameters that may differ between countries, in which two kinds of goods are tradable. Such heterogeneity may violate the Taylor principle, which implies that aggressive monetary policy is desirable to attain determinate equilibrium. We evaluate the forms of interest rate control needed to attain macroeconomic stability in consideration of the heterogeneity.

Keywords: heterogeneity; Taylor rule; open economy; equilibrium determinacy (search for similar items in EconPapers)
JEL-codes: E52 F41 (search for similar items in EconPapers)
Date: 2012-03-01
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:37017

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