Rules-based monetary policy and the threat of indeterminacy when trend inflation is low

• 成果类型: Article
• 署名作者: Khan, Hashmat; Phaneuf, Louis; Victor, Jean Gardy
• 署名单位: Carleton University; University of Quebec; University of Quebec Montreal
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2019.03.001
• 发表日期: 2020
• 页码: 317-333
• 关键词: Low trend inflation; Taylor rule; Output gap; output growth; Sticky wages; Trend growth; Determinacy

摘要

Indeterminacy in new Keynesian models with Calvo-contracts can occur even at low trend inflation levels of 2% or 3%. The interaction of trend inflation with nominal wage rigidity and trend growth in output causes large distortions in the steady state and expands the indeterminacy region. Consequently, even interest rate rules with strong inflation responses may not be sufficient to ensure determinacy. A policy rule reacting to output growth but not to output gap significantly increases the prospect of determinacy. Although the threat of indeterminacy is less severe under Taylor-contracts, significant departures from the original Taylor Principle are required for determinacy. (C) 2019 Elsevier B.V. All rights reserved.