Kaushik Mitra (2004) Performance of Inflation Targeting Based On Constant Interest Rate Projections.
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Monetary policy is sometimes formulated in terms of a target level of inflation, a fixed time horizon and a constant interest rate that is anticipated to achieve the target at the specified horizon. These requirements lead to constant interest rate (CIR) instrument rules. Using the standard New Keynesian model, it is shown that some forms of CIR policy lead to both indeterminacy of equilibria and instability under adaptive learning. However, some other forms of CIR policy perform better. We also examine the properties of the different policy rules in the presence of inertial demand and price behaviour.
This is a Accepted version This version's date is: 2004 This item is not peer reviewed
https://repository.royalholloway.ac.uk/items/7c152fb6-1f7f-5261-01e7-e9f4bb46e1b0/1/
Deposited by Leanne Workman (UXYL007) on 15-Oct-2012 in Royal Holloway Research Online.Last modified on 15-Oct-2012
©2004 Seppo Honkapohja and Kaushik Mitra. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit including © notice, is given to the source.