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dc.contributor.authorDavies, Cerien_US
dc.contributor.authorGillman, Maxen_US
dc.contributor.authorKejak, Michalen_US
dc.date.accessioned2012-09-19en_US
dc.date.accessioned2012-11-02T14:27:57Z-
dc.date.available2012-11-02T14:27:57Z-
dc.date.issued2012en_US
dc.identifier.urihttp://hdl.handle.net/10419/65772-
dc.description.abstractThe paper presents a human-capital-based endogenous growth, cash-in-advance economy with endogenous velocity where exchange credit is produced in a decentralized banking sector, and money is supplied stochastically by the central bank. From this it derives an exact functional form for a general equilibrium Taylor rule. The inflation coefficient is always greater than one when the velocity of money exceeds one; velocity growth enters the equilibrium condition as a separate variable. The paper then successfully estimates the magnitude of the coefficient on inflation from 1000 samples of Monte Carlo simulated data. This shows that it would be spurious to conclude that the central bank has a reaction function with a strong response to inflation in a 'Taylor principle' sense, since it is only meeting fiscal needs through the inflation tax. The paper also estimates several deliberately misspecified models to show how an inflation coefficient of less than one can result from model misspecification. An inflation coefficient greater than one holds theoretically along the balanced growth path equilibrium, making it a sharply robust principle based on the economy's underlying structural parameters.en_US
dc.language.isoengen_US
dc.publisherCardiff Univ, Cardiff Business School, Economics Section Cardiffen_US
dc.relation.ispartofseriesCardiff Economics Working Papers E2012/20en_US
dc.subject.jelE13en_US
dc.subject.jelE31en_US
dc.subject.jelE43en_US
dc.subject.jelE52en_US
dc.subject.ddc330en_US
dc.subject.keywordTaylor ruleen_US
dc.subject.keywordvelocityen_US
dc.subject.keywordforward-lookingen_US
dc.subject.keywordmisspecification biasen_US
dc.titleDeriving the Taylor principle when the central bank supplies moneyen_US
dc.typeWorking Paperen_US
dc.identifier.ppn726100765en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
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