The methodology for assessing interest-rate policy rules: some comments

This paper is critical of the conceptual foundations and methodology adopted by Smithin (2020) in his exploration of the impact of different interest-rate policy rules on inflation. His modelling framework is too narrow to adequately discriminate between different interest-rate rules in terms of their broader macroeconomic impacts.

Money Supply Rules and Interest Rate Rules

In this chapter we introduce various formulations of central bank policy rule consider their implications within the context of our model. We introduce preference shocks to our model to create a motivation for smoothing by the central bank.

Interest rate rules and equilibrium (in)determinacy in a small open economy: the role of internationally traded capital

This study develops a small-open-economy version of Benhabib, J., S. Schmitt-Grohé, and M. Uribe. 2001. “Monetary Policy and Multiple Equilibria.” American Economic Review 91: 167–186. We systematically explore the role of international capital mobility and the portfolio balance channel in terms of macroeconomic (in)stability when the government follows a commonly-adopted interest-rate feedback rule. In a one-traded-good model, the steady-state equilibrium, in general, is locally determinate; international capital mobility stabilizes the economy against business cycle fluctuations under a simple interest-rate feedback rule. In a two-good (traded and non-traded goods) model, the relationship between equilibrium (in)determinacy and the aggressiveness of interest rate rules is not monotonic, and crucially depends on households’ portfolio preferences. These results suggest that a unified interest rate rule can end up with very different consequences of macroeconomic (in)stability in an open economy from those in a closed economy.