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dc.contributor.authorBenhabib, Jessen_US
dc.contributor.authorSchmitt-Grohé, Stephanieen_US
dc.contributor.authorUribe, Martínen_US
dc.date.accessioned2009-01-29T15:49:04Z-
dc.date.available2009-01-29T15:49:04Z-
dc.date.issued2003en_US
dc.identifier.urihttp://hdl.handle.net/10419/23162-
dc.description.abstractThe existing literature on the stabilizing properties of interest-rate feedback rules has stressed the perils of linking interest rates to forecasts of future inflation. Such rules have been found to give rise to aggregate fluctuations due to self-fulfilling expectations. In response to this concern, a growing literature has focused on the stabilizing properties of interest-rate rules whereby the central bank responds to a measure of past inflation. The consensus view that has emerged is that backward-looking rules contribute to protecting the economy from embarking on expectations-driven fluctuations. A common characteristic of the existing studies that arrive at this conclusion is their focus on local analysis. The contribution of this paper is to conduct a more global analysis. We find that backward-looking interest-rate feedback rules do not guarantee uniqueness of equilibrium. We present examples in which for plausible parameterizations attracting equilibrium cycles exist. The paper also contributes to the quest for policy rules that guarantee macroeconomic stability globally. Our analysis indicates that policy rules whereby the interest rate is set as a function of the past interest rate and current inflation are likely to ensure global stability provided that the coefficient on lagged interest rates is greater than unity.en_US
dc.language.isoengen_US
dc.publisheren_US
dc.relation.ispartofseriesWorking papers / Rutgers University, Department of Economics 2003,04en_US
dc.subject.jelE63en_US
dc.subject.jelE31en_US
dc.subject.jelE52en_US
dc.subject.ddc330en_US
dc.subject.keywordBackward looking Taylor rulesen_US
dc.subject.keywordendogenous cyclesen_US
dc.subject.keywordsticky pricesen_US
dc.subject.stwZinspolitiken_US
dc.subject.stwRegelgebundene Politiken_US
dc.subject.stwTaylor-Regelen_US
dc.subject.stwInflationen_US
dc.subject.stwKonjunkturen_US
dc.subject.stwInflationsbekämpfungen_US
dc.subject.stwDynamisches Gleichgewichten_US
dc.subject.stwTheorieen_US
dc.subject.stwHopf bifurcationen_US
dc.titleBackward-Looking Interest-Rate Rules, Interest-Rate Smoothing,and Macroeconomic Instabilityen_US
dc.typeWorking Paperen_US
dc.identifier.ppn362926220en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
Appears in Collections:Working Papers, Department of Economics, Rutgers University

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