Price-level determinacy, lower bounds on the nominal interest rate, and liquidity traps
By: Ragna Alstadheim, Dale W. Henderson.
Contributors: Henderson, Dale W.
Series: International finance discussion papers ;; no. 795; International finance discussion papers (Online) ;; no. 795.
Publisher: Federal Reserve Board
Published: 2004
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Description: "We consider monetary-policy rules with inflation-rate targets and interest-rate or money-growth instruments using a flexible-price, perfect-foresight model.  There is always a locally-unique target equilibrium.  There may also be below-target equilibria (BTE) with inflation always below target and constant, asymptotically approaching or eventually reaching a below-target value, or oscillating.  Liquidity traps are neither necessary nor sufficient for BTE which can arise if monetary policy keeps the interest rate above a lower bound.  We construct monetary rules that preclude BTE when fiscal policy does not.  Plausible fiscal policies preclude BTE for any monetary policy; those policies exclude surpluses and, possibly, balanced budgets"--Federal Reserve Board web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 9/13/2004.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.