Details

Autor(en) / Beteiligte

• Cosimano, Thomas F.
• Van Huyck, John B.

Titel

Dynamic monetary control and interest rate stabilization

Ist Teil von

• Journal of monetary economics, 1989, Vol.23 (1), p.53-63

Ort / Verlag

Amsterdam: Elsevier B.V

Erscheinungsjahr

1989

Quelle

Elsevier Journal Backfiles on ScienceDirect (DFG Nationallizenzen)

Beschreibungen/Notizen

• Interest rate stabilization results in an instrument shortage that complicates monetary control by introducing strategic considerations into the Trading Desk's decision problem. The paper demonstrates that, when expected future open market operations influence current bank and depositor behavior, an instrument shortage is necessary and sufficient for the Commitment policy to be time-inconsistent and for the Discretionary policy to be suboptimal, i.e., worse than the Commitment policy. The moving average component of the Commitment policy is of higher order than the Discretionary policy. Under either regime, the expected value of the representative bank is increasing in the Trading Desk's emphasis on interest rate stability.