Determinacy of interest rate rules with bond transaction services in a cashless economy
Marzo, Massimiliano; Zagaglia, Paolo (08.08.2008)
Numero
24/2008Julkaisija
Suomen Pankki
2008
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:bof-20140807222Tiivistelmä
Canzoneri and Diba (2004) show that the Taylor principle is not a panacea for equilibrium determinacy in a model where bonds and money provide liquidity services to households. We consider a cashless New Keynesian model with two types of government bonds. One bond provides transaction services, whereas the other is used only as a store of value. We show that the Taylor principle is still sacrosanct, and that the results of Leeper (1991) are confirmed. Keywords: monetary policy, fiscal policy, government bonds, determinacy JEL classification numbers: E52, C68