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Monetary policy, Taylor's rule and endogenous fluctuations

Alonso González, Alberto and Palacio Vera, Alfonso (1999) Monetary policy, Taylor's rule and endogenous fluctuations. [ Documentos de Trabajo de la Facultad de Ciencias Económicas y Empresariales; nº 19, 1999, ISSN: 2255-5471 ]

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Abstract

The paper analyses the dynamic behaviour of an economy when the central bank (CB) implements an inflation targeting regime. For this purpose, a simple macroeconomic model is constructed and subjected to formal dynamic analysis. A first result is that, under certain conditions, the emergence of endogenous oscillations in the economy is a possible scenario. A second implication is that CBs face two main policy dilemmas: (i) the degree of gradualism adopted when setting the level of short-term interest rates and (ii) the desirability or otherwise of raising interest rates as soon as economic indicators suggest the emergence of inflationary pressures.


Item Type:Working Paper or Technical Report
Uncontrolled Keywords:Política monetaria; Regla de Taylor.
Subjects:
Series Name:Documentos de Trabajo de la Facultad de Ciencias Económicas y Empresariales
Volume:1999
Number:19
ID Code:6690
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Deposited On:30 Nov 2007
Last Modified:22 Oct 2014 17:47

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