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https://hdl.handle.net/2440/22808
Type: | Journal article |
Title: | Taylor rules and macroeconomic instability or how the Central Bank can preempt sunspot expectations |
Author: | Weder, M. |
Citation: | Journal of Money, Credit and Banking, 2006; 38(3):655-677 |
Publisher: | Ohio State Univ Press |
Issue Date: | 2006 |
ISSN: | 0022-2879 |
Abstract: | This paper derives new results on the effects of employing Taylor rules in economies that are subject to real market imperfections such as production externalities. Policies which respond to output movements can block sunspot equilibria that arise from the increasing returns. The paper also finds that rules which should be chosen (avoided) in perfect market environments often yield (ensure) multiple (unique) rational expectations solutions in alternative settings. Therefore, exact knowledge on the degree of market imperfection may be integral for robust policy advice. |
Keywords: | interdeterminacy increasing return of scale Taylor rules cash-in-advance economies |
Description: | The definitive version is available at www.blackwell-synergy.com |
Appears in Collections: | Aurora harvest 2 Economics publications |
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