Instrument instability and short-term monetary control |
| |
Authors: | Timothy D Lane |
| |
Institution: | University of Iowa, Iowa City, IA 52242, USA |
| |
Abstract: | The literature on instrument instability tends support to a policy of smoothing interest rates: it contends that rigid adherence to a monetary rule would bring about explosive interest-rate movements. This contention is examined using a simple model which incorporates rational expectations; the results suggest that instrument instability is associated with interest-rate smoothing rather than with short-term control of the money supply. Furthermore, policy that attempts to stabilize interest rates may itself account for empirical findings which have hitherto been viewed as evidence that instrument instability would occur if the money supply were closely controlled. |
| |
Keywords: | |
本文献已被 ScienceDirect 等数据库收录! |
|