Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212987 
Year of Publication: 
2017
Series/Report no.: 
BoF Economics Review No. 2/2017
Publisher: 
Bank of Finland, Helsinki
Abstract: 
According to the Neo-Fisherian Hypothesis a nominal policy rate increase leads to an in-crease in the rate of inflation also in the short-run and the effects of Neo-Fisherian forward guidance on inflation and output are small. These results are obtained by assuming that the nominal interest rate is unresponsive to the output gap and inflation at least temporarily and that an arbitrary assumption that a backward stable perfect foresight solution is selected among a continuum of perfect foresight equilibria is valid. The result that nominal policy rates can move inflation in the same direction is at odds with monetary theory and practice.
Subjects: 
Neo-Fisherian Hypothesis
Monetary Policy
Liquidity
JEL: 
E47
E52
E61
Persistent Identifier of the first edition: 
Document Type: 
Research Report

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