Monetary Policy and Multiple Equilibria

نویسنده

  • Jess Benhabib
چکیده

In this paper, we study interest rate feedback rules whereby the nominal interest rate is set as an increasing function of the in ation rate and characterize conditions under which such rules generate multiple equilibria. We show that these conditions depend not only on the monetaryscal regime (as emphasized in the scal theory of the price level) but also on the way in which money is assumed to enter preferences and technology. We analyze this issue in exible and sticky price environments. We provide a number of examples in which, contrary to what is commonly believed, active monetary policy in combination with a scal policy that preserves government solvency gives rise to multiple equilibria and passive monetary policy renders the equilibrium unique. JEL Classi cation Numbers: E52, E31, E63.

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تاریخ انتشار 1998