Details

Autor(en) / Beteiligte

• EVANS, GEORGE W.
• MCGOUGH, BRUCE

Titel

Interest-Rate Pegs in New Keynesian Models

Ist Teil von

• Journal of money, credit and banking, 2018-08, Vol.50 (5), p.939-965

Ort / Verlag

Columbus: Wiley Periodicals, Inc

Erscheinungsjahr

2018

Link zum Volltext

Quelle

Wiley Online Library

Beschreibungen/Notizen

• The conventional policy perspective is that lowering the interest rate increases output and inflation in the short run, while maintaining inflation at a higher level requires a higher interest rate in the long run. In contrast, it has been argued that a Neo-Fisherian policy of setting an interest-rate peg at a fixed higher level will increase the inflation rate. We show that adaptive learning argues against the Neo-Fisherian approach. Pegging the interest rate at a higher level will induce instability and most likely lead to falling inflation and output over time. Eventually, this would precipitate a change of policy.