| Description |
1 online resource (164 pages) |
| Series |
Schriften zur Wirtschaftstheorie und Wirtschaftspolitik, 1433-1519 ; Bd. 44 |
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Schriften zur Wirtschaftstheorie und Wirtschaftspolitik ; Bd. 44, 1433-1519
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| Contents |
Table of Contents; List of Figures and Tables 11; List of Symbols 13; I. Introduction 17; II. Monetary policy design and criteria for assessing monetary policy rules 21; 1. Monetary policy issues 21; 1.1. The case for rules rather than discretion 23; 1.1.1. Analytical distinction between rules and discretion 23; 1.1.2. The problem of dynamic inconsistency 24; 1.1.3. Advantages of central bank commitment to a monetary policy rule 25; 1.2. Design of monetary policy rules 26; 1.2.1. Rules, instruments and targets 28; 1.2.2. Choice of instruments 30; 1.2.3. Choice of target variables 31 |
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2. Criteria for assessing monetary policy rules 372.1. Operationality/Simplicity 38; 2.2. Local determinacy of rational-expectations equilibrium and monetary policy analysis 41; 2.2.1. An overview 41; 2.2.2. Presenting the criterion 42; 2.2.3. Determinacy and reactions to shocks 43; 2.3. The Taylor principle 45; 3. Preliminary summary 49; III. A New Keynesian model with endogenous capital with adjustment costs 51; 1. New Keynesian framework: an overview 52; 2. Modelling capital and investment 55; 3. The model with endogenous capital and adjustment costs 60 |
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3.1. Household utility function and optimality conditions 603.2. The "IS sector" 63; 3.3. Capital accumulation adjustment costs 64; 3.4. Inflation and real wage equations under sticky prices and wages 66; 3.5. Interest-rate rule specifications 67; 4. Determinacy analysis 68; 4.1. Calibration 69; 4.2. Determinacy and the Taylor principle: some numerical examples 72; 4.2.1. Active rule 74; 4.2.2. Passive rule 75; 4.2.3. Interest-rate rule response coefficient values and determinacy: a global perspective 77; 5. Preliminary summary of results 79; IV. Shock impulse responses 81 |
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1. Some preliminary remarks on the adjustment mechanisms in the system 811.1. Monetary policy unit shock 82; 1.2. Technology unit shock 84; 1.3. Consumption preference unit shock 86; 2. Active rule 87; 2.1. The case of inflation-targeting only 87; 2.1.1. Monetary policy unit shock 88; 2.1.2. Technology unit shock 92; 2.1.3. Consumption preference unit shock 95; 2.2. The case of inflation- and output-targeting 98; 2.2.1. Monetary policy unit shock 98; 2.2.2. Technology unit shock 101; 2.2.3. Consumption preference unit shock 104 |
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2.3. The case of inflation- and output-targeting with interest-rate smoothing 1072.3.1. Monetary policy unit shock 107; 2.3.2. Technology unit shock 110; 2.3.3. Consumption preference unit shock 113; 3. Passive rule 116; 3.1. The case of inflation-targeting only 116; 3.2. The case of inflation- and output-targeting 116; 3.2.1. Monetary policy unit shock 117; 3.2.2. Technology unit shock 120; 3.2.3. Consumption preference unit shock 123; 3.3. The case of inflation- and output-targeting with interest-rate smoothing 126; 3.3.1. Monetary policy unit shock 126; 3.3.2. Technology unit shock 129 |
| Summary |
The last decades have witnessed major progress in both monetary policy theory and practice, with broad academic consensus on the desirability of monetary policy rules and ongoing research on their exact specification. Typically, the analysis is carried out in a New Keynesian framework with nominal rigidities and constant capital stock. The latter represents a constraint that this study seeks to overcome by introducing a model with investment and capital adjustment costs. The work assesses different interest-rate rule specifications with respect to the target variables included, based on two criteria: determinacy of rational-expectations equilibrium and convergence to steady state after a shock. The study concludes that rules with both an inflation and an output gap target ensure a unique rational-expectations equilibrium and a less distressful adjustment of the economy after the occurrence of shocks |
| Notes |
3.3.3. Consumption preference unit shock 132 |
| Bibliography |
Includes bibliographical references (pages 145-158) |
| Notes |
Print version record |
| Subject |
Interest rates.
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Monetary policy.
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Keynesian economics.
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Economic theory & philosophy.
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Monetary economics.
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Politics & government.
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BUSINESS & ECONOMICS -- Money & Monetary Policy.
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Interest rates
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Keynesian economics
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Monetary policy
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| Form |
Electronic book
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| ISBN |
9783653014440 |
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3653014441 |
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