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The Taylor principle in a medium-scale macroeconomic model
Authors:Tommy Sveen  Lutz Weinke
Affiliation:1. Department of Economics, BI Norwegian Business School, Nydalsveien 37, N-0484 Oslo, Norway;2. Humboldt-Universität zu Berlin, School of Economics and Business, Institute of Economic Policy, Spandauer Straße 1, D-10099 Berlin, Germany;1. Econometric Institute, Erasmus University Rotterdam, P.O. Box 1738, NL-3000 DR Rotterdam, Netherlands;2. Department of Quantitative Economics, University of Amsterdam, Valckenierstraat 65-67, 1018 XE Amsterdam, Netherlands;1. University Paris1 Panthéon – Sorbonne, CES UMR 8174, 106 bd de l''Hôpital, 75013 Paris, France;2. Lombard Odier Asset Management, Avenue des Morgines 6, 1213 Petit-Lancy, Switzerland;3. University Paris 1 Panthéon-Sorbonne, MSE, 106 bd de l''Hôpital, 75013 Paris, France;1. Jerusalem College of Technology, Jerusalem 91160, Israel;2. Georgia State University, Atlanta, GA 30303, USA;1. Università della Svizzera Italiana, Via Buffi 13, CH-6900 Lugano, Switzerland;2. CREST, CEPREMAP, France;3. University of Toronto, Canada
Abstract:We consider a medium-scale New-Keynesian model which combines features that have been shown to explain fairly well postwar U.S. business cycles. Our main result demonstrates that the determinacy properties of forward-looking interest rate rules resemble, at least qualitatively, the corresponding outcomes under current-looking rules. We explain how and why the empiri-cally relevant features of our model generate this novel result.
Keywords:Nominal rigidities  Real rigidities  Monetary policy
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