Monetary Policy with Single Instrument Feedback Rules

Pedro Teles, Isabel Correia () and Bernardino Adao
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Bernardino Adao: Banco de Portugal

No 622, 2007 Meeting Papers from Society for Economic Dynamics

Abstract: We revisit the issue of multiplicity of equilibria when monetary policy is conducted with either the interest rate or the money supply as the sole instrument of policy. We show that in standard monetary models there are interest rate feedback rules, and also money supply rules, that implement a unique global equilibrium. This is a contribution to a literature that either concentrates on conditions for local determinacy, or criticizes that approach showing that local determinacy might be associated with global indeterminacy. The interest rate rules we propose are price targeting rules that respond to the forecasts of future economic activity and the future price level.

Date: 2007
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Related works:
Working Paper: Monetary Policy with Single Instrument Feedback Rules (2005)
Working Paper: Monetary policy with single instrument feedback rules (2004)
Working Paper: Monetary Policy with Single Instrument Feedback Rules (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed007:622

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