Nonlinear monetary policy rules in a pure exchange overlapping generations model

2017 ◽  
Vol 27 (5) ◽  
pp. 1181-1203 ◽  
Author(s):  
Anna Agliari ◽  
Ahmad Naimzada ◽  
Nicolò Pecora
Keyword(s):  
Monetary Policy ◽  
Overlapping Generations ◽  
Overlapping Generations Model ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Pure Exchange

MONETARY FEEDBACK RULES AND EQUILIBRIUM DETERMINACY IN PURE EXCHANGE OVERLAPPING GENERATIONS MODELS

2017 ◽  
Vol 23 (1) ◽  
pp. 29-51
Author(s):  
Ahmad Naimzada ◽  
Nicolò Pecora ◽  
Alessandro Spelta
Keyword(s):  
Monetary Policy ◽  
Overlapping Generations ◽  
Inflation Rate ◽  
Point Of View ◽  
Policy Rule ◽  
Overlapping Generations Model ◽  
Monetary Equilibrium ◽  
Pure Exchange ◽  
Feedback Rule ◽  
Leaning Against The Wind

This paper considers a pure exchange overlapping generations model in which the money-growth rate is endogenous and follows a feedback rule. Different specifications for the monetary policy rule are analyzed, namely a so-called current, forward, or backward-looking feedback rule, depending on whether the monetary authority uses the actual, expected, or last observed values of the inflation rate to set the monetary policy. We study how the responsiveness of the policy rule with respect to inflation affects the determinacy of the monetary equilibrium. A policy rule is called aggressive (moderate) if it responds strongly (moderately) to inflation deviations from the target. We show how aggressive feedback rules, depending on the considered timing, can reinforce mechanisms that lead to indeterminacy or may lead the inflation rate to fluctuate around the monetary equilibrium at which monetary policy is aggressive. Aleaning against the windpolicy seems to be more desirable from an equilibrium determinacy point of view. On the contrary, aleaning with the windpolicy could not be the recommended policy for the Central Bank.

Monetary Policy Rules for Financially Vulnerable Economies

2001 ◽  
Author(s):  
Eduardo A. Morón ◽  
Diego Winkelried
Keyword(s):  
Monetary Policy ◽  
Policy Rules ◽  
Monetary Policy Rules

scholarly journals A RECONSIDERATION OF THE DOCTRINAL FOUNDATIONS OF MONETARY POLICY RULES: FISHER VERSUS CHICAGO

2021 ◽  
Vol 43 (1) ◽  
pp. 55-82
Author(s):  
George S. Tavlas
Keyword(s):  
Monetary Policy ◽  
Price Level ◽  
Policy Instruments ◽  
Policy Instrument ◽  
Superior Performance ◽  
Policy Uncertainty ◽  
Direct Link ◽  
Policy Rule ◽  
Policy Rules ◽  
Monetary Policy Rules

There has long been a presumption that the price-level stabilization frameworks of Irving Fisher and Chicagoans Henry Simons and Lloyd Mints were essentially equivalent. I show that there were subtle, but important, differences in the rationales underlying the policies of Fisher and the Chicagoans. Fisher’s framework involved substantial discretion in the setting of the policy instruments; for the Chicagoans the objective of a policy rule was to tie the hands of the authorities in order to reduce discretion and, thus, monetary policy uncertainty. In contrast to Fisher, the Chicagoans provided assessments of the workings of alternative rules, assessed various criteria—including simplicity and reduction of political pressures—in the specification of rules, and concluded that rules would provide superior performance compared with discretion. Each of these characteristics provided a direct link to the rules-based framework of Milton Friedman. Like Friedman’s framework, Simons’s preferred rule targeted a policy instrument.

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