Interest Rate Rules and Transitional Dynamics in an Endogenously Growing Open Economy
Resource
Journal of International Money and Finance,27(1),54-75.
Journal
Journal of International Money and Finance
Pages
54-75
Date Issued
2008-12
Date
2008-12
Author(s)
賴景昌(with Chen, Shu-hua, Ming-fu Shaw
Juin-jen Chang)
Abstract
This paper sets up an endogenous growth model of an open economy in which the monetary authority implements a gradualist interest-rate rule with targets for both inflation and economic growth. We show that, under a passive rule, a monetary equilibrium exists and is unique. Moreover, the equilibrium is locally determinate. By contrast, an active rule implies either two equilibria, one high-growth and one low-growth, or none. In the case of two equilibria, the high-growth equilibrium is locally determinate, while the low-growth equilibrium is a source. Besides, the stabilization and growth effects of alternative target policies are also explored in this study. Moreover, in departing from the existing literature, we turn to focus on the analysis of transition with a particular emphasis on the case of imperfect credibility. © 2007.
SDGs
Type
journal article