European Central Bank Details Research in Macroeconomics
2012 MAY 11 - (VerticalNews.com) -- "This paper considers an overlapping generations economy with capital accumulation and two outside assets (government bonds, fiat money) and compares the dynamic properties of two stylized monetary policy rules: (i) a constant money growth rule and (ii) an interest rate targeting rule which allows for an endogenous feedback to inflation. The results of this comparison depend strongly on whether under the overall monetary-fiscal regime long-run real interest rates are independent of inflation," scientists writing in the Journal of Macroeconomics report.
"If this is the case (i.e. superneutrality prevails) there exists in our model a unique and stable steady state under either monetary policy rule. By contrast, if superneutrality fails there is scope for much richer dynamics, characterized by multiple steady states and globally indeterminate dynamics," wrote Thadden L. von and colleagues, European Central Bank.
The researchers concluded: "The paper offers a classification of such constellations and argues that under both monetary policy rules uniqueness and stability of steady states can be restored, provided the long-run inflation target and the feedback of the interest rate targeting rule are appropriately chosen."
von and colleagues published their study in the Journal of Macroeconomics (Monetary policy rules in an OLG model with non-superneutral money. Journal of Macroeconomics, 2012;34(1):147-166).
Additional information can be obtained by contacting L. von Thadden, European Cent Bank, Monetary Policy Strategy Div, D-60311 Frankfurt, Germany.
The publisher of the Journal of Macroeconomics can be contacted at: Louisiana State Univ Pr, Baton Rouge, La 70893 Usa.
Keywords: City:Frankfurt, Country:Germany, Region:Europe
This article was prepared by VerticalNews Economics editors from staff and other reports. Copyright 2012, VerticalNews Economics via VerticalNews.com.