Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/200584
Authors: 
Campbell, Jeffrey R.
Weber, Jacob P.
Year of Publication: 
2018
Series/Report no.: 
Working Paper 2018-14
Abstract: 
New Keynesian economies with active interest rate rules gain equilibrium determinacy from the central bank's incredible off-equilibrium-path promises (Cochrane, 2011). We suppose instead that the central bank sets interest rate paths and occasionally has the discretion to change them. Private agents taking future central bank actions and their own best responses to them as given reduces the scope for self-fulfilling prophecies. With empirically-reasonable frequencies of central-bank reoptimization, the monetary-policy game has a unique Markov-perfect equilibrium wherein forward guidance influences current outcomes without displaying a forward-guidance puzzle.
Subjects: 
Monetary Policy
Open Mouth Operations
Quasi-Commitment
Ramsey Problem
JEL: 
E12
E52
Persistent Identifier of the first edition: 
Document Type: 
Working Paper
Social Media Mentions:

Files in This Item:
File
Size
410.84 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.