Interest rate rules vs. money growth rules: a welfare comparison in a cash-in-advance economy

Article Abstract:

Central bankers prefer the simple monetary policy rule of interest rate peg because it eliminates the distortion on the capital accumulation decision and a distortion on portfolio choice caused by the assumed rigidity in the typical household's cash savings choice. The simple interest rate rule allows the household to respond better to technology and government spending shocks, thus improving welfare by increasing output variability. This was gleaned from a comparison of the welfare consequences of an interest rate peg and a money growth peg, two simple rules for monetary policy.

Commercial Banking, State commercial banks, State Banks, Research, Economic aspects, Interest rates, Monetary policy, Money supply

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Does it matter (for equilibrium determinacy) what price index the central bank targets?

Article Abstract:

Inflation targeting issues of Central bank in a price fluctuating two-sector equilibrium model are examined. Implications of inflation targeting on equilibrium are analyzed. Relevance of a modified Taylor principle in this model is also investigated.

United States, Government expenditures, Forecasts, trends, outlooks, Analysis, Usage, Forecasts and trends, Economic policy, Market trend/market analysis, Series, Taylor's, Taylor's series (Mathematics), Inflation targeting

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Learning and the central bank

Article Abstract:

According to Taylor rule, 993 the sunspot equilibria may arise in which the central bank may vary the nominal rate with movements in inflation. These sunspot equilibria may be learnable in the sense of E-stability.

Commercial Banks, Legal issues & crime, Government regulation (cont), Government regulation, Legal/Government Regulation, Banking industry, Influence, Inflation (Finance), Inflation (Economics)

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