The Benefits of Interest Rate Targeting: A Partial and a General Equilibrium Analysis
نویسندگان
چکیده
The authors of this paper explore some of the benefits of interest rate targeting in both partial equilibrium and general equilibrium environments. They find that an interest rate peg is desirable because such a policy mitigates the distortions that arise in a monetary economy. In order to achieve the interest rate peg, money growth should be procyclical. This increase in output variability is actually welfare-improving.
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