Interest Rate Rules and Macroeconomic Stabilization
نویسنده
چکیده
High degrees of relative risk aversion induce indeterminacy in cashin-advance economies. This paper Þnds that Taylor-style policies can pre-empt such sunspot equilibria. SpeciÞc policy recommendations depend on the fundamentals of the economy, i.e. the empirically true value of coefficient of relative risk aversion. ∗This paper was written while I was aDFG Heisenberg Fellow. I would like to thank the Federal Reserve Bank of San Francisco for its hospitality as well as Chuck Carlstrom and one anonymous referee for helpful comments.
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