Super-Inertial Interest Rate Rules Are Not Solutions of Ramsey Optimal Monetary Policy Article - 2023

Jean-Bernard Chatelain, Kirsten Ralf

Jean-Bernard Chatelain, Kirsten Ralf, « Super-Inertial Interest Rate Rules Are Not Solutions of Ramsey Optimal Monetary Policy  », SSRN Electronic Journal, à paraître

Abstract

Giannoni and Woodford (2003) found that the equilibrium determined by commitment to a super-inertial rule (where the sum of the parameters of lags of interest rate exceed ones and does not depend on the auto-correlation of shocks) corresponds to the unique bounded solution of Ramsey optimal policy for the new-Keynesian model. By contrast, this note demonstrates that commitment to an inertial rule (where the sum of the parameters of lags of interest rate is below one and only depends on the auto-correlation of shocks) corresponds to the unique bounded solution.

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