Indeterminacy with inflation-forecast-based rules in a two-bloc model
By: Nicoletta Batini, Paul Levine, Joseph Pearlman.
Series: International finance discussion papers ;; no. 797; International finance discussion papers (Online) ;; no. 797.
Publisher: Federal Reserve Board
Published: 2004
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Description: "We examine the performance of forward-looking inflation-forecast-based rules in open economies.  In a New Keynesian two-bloc model, a methodology first employed by Batini and Pearlman (2002) is used to obtain analytically the feedback parameters/horizon pairs associated with unique and stable equilibria.  Three key findings emerge: First, indeterminacy occurs for any value of the feedback parameter on inflation if the forecast horizon lies too far into the future.  Second, the problem of indeterminacy is intrinsically more serious in the open economy.  Third, the problem is compounded further in the open economy when central banks respond to expected consumer, rather than producer price inflation"--Federal Reserve Board web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 8/27/2004.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.