Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/323622 
Year of Publication: 
2023
Citation: 
[Journal:] Revue d'économie politique [ISSN:] 2105-2883 [Volume:] 133 [Issue:] 1 [Publisher:] Dalloz [Place:] Paris [Year:] 2023 [Pages:] 119-146
Publisher: 
Dalloz, Paris
Abstract: 
This paper demonstrates that the equilibrium determined by the commitment of a Central Bank to a non-stationary ("super-inertial") interest rate rule (where the sum of the parameters of the lags of the interest rate exceeds one and does not depend on the persistence of shocks) does not correspond to the unique bounded solution and the stable equilibrium of Ramsey optimal policy for the new-Keynesian model. It always destabilizes inflation because of the rounding errors and the measurement errors of the parameters of the monetary policy transmission mechanism. By contrast, the commitment of a Central Bank to a stationary interest rate rule rule (where the sum of the parameters of lags of the interest rate is strictly below one and depends on the persistence of shocks) corresponds to the unique bounded solution and the stable equilibrium of Ramsey optimal policy.
Subjects: 
Ramsey optimal policy
new-Keynesian model
Interest rate smoothing
Super-inertial rule
Stability
JEL: 
C61
C62
E43
E44
E47
E52
E58
Published Version’s DOI: 
Document Type: 
Article
Document Version: 
Accepted Manuscript (Postprint)
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