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Interest rate rules vs. money growth rules: a welfare comparison in a cash-in-advance economy

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Author Info
Charles T. Carlstrom
Timothy S. Fuerst

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Abstract

A consideration of the welfare consequences of two simple monetary policy rules--an interest rate peg and a money growth peg--in a dynamic general-equilibrium model, indicating that the interest rate rule dominates the money growth rule.

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Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 9504.

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Date of creation: 1995
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Handle: RePEc:fip:fedcwp:9504

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Keywords: Monetary theory;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Bennett T. McCallum, 1986. "Some Issues Concerning Interest Rate Pegging, Price Level Determinacy, and the Real Bills Doctrine," NBER Working Papers 1294, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Sims, Christopher A, 1994. "A Simple Model for Study of the Determination of the Price Level and the Interaction of Monetary and Fiscal Policy," Economic Theory, Springer, vol. 4(3), pages 381-99.
  3. Smith, Bruce D, 1988. "Legal Restrictions, "Sunspots," and Peel's Bank Act: The Real Bills Doctrine versus the Quantity Theory Reconsidered," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 3-19, February. [Downloadable!] (restricted)
  4. Lawrence J. Christiano & Martin Eichenbaum, 1993. "Interest rate smoothing in an equilibrium business cycle model," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  5. Cooley, Thomas F & Hansen, Gary D, 1989. "The Inflation Tax in a Real Business Cycle Model," American Economic Review, American Economic Association, vol. 79(4), pages 733-48, September. [Downloadable!] (restricted)
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  6. Friedman, Benjamin M., 1990. "Targets and instruments of monetary policy," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 22, pages 1185-1230 Elsevier. [Downloadable!] (restricted)
  7. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 1993. "Labor Hoarding and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 245-73, April. [Downloadable!] (restricted)
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  8. William Poole, 1970. "Optimal choice of monetary policy instruments in a simple stochastic macro model," Staff Studies 57, Board of Governors of the Federal Reserve System (U.S.).
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  9. Fischer, Stanley, 1979. "Capital Accumulation on the Transition Path in a Monetary Optimizing Model," Econometrica, Econometric Society, vol. 47(6), pages 1433-39, November. [Downloadable!] (restricted)
  10. Howitt, Peter, 1992. "Interest Rate Control and Nonconvergence to Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 776-800, August. [Downloadable!] (restricted)
  11. Fuerst, Timothy S., 1992. "Liquidity, loanable funds, and real activity," Journal of Monetary Economics, Elsevier, vol. 29(1), pages 3-24, February. [Downloadable!] (restricted)
  12. Dotsey, Michael & Mao, Ching Sheng, 1992. "How well do linear approximation methods work? : The production tax case," Journal of Monetary Economics, Elsevier, vol. 29(1), pages 25-58, February. [Downloadable!] (restricted)
  13. Woodford, Michael, 1994. "Monetary Policy and Price Level Determinacy in a Cash-in-Advance Economy," Economic Theory, Springer, vol. 4(3), pages 345-80.
  14. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-11, July. [Downloadable!] (restricted)
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