In a fixed-regime setting, it is known since Leeper (1991) that both monetary dominance (mix of active monetary and passive fiscal policies) and fiscal dominance (mix of active fiscal and passive monetary policy) regimes yield a determinate unique equilibrium. This paper shows that in a...

Post great financial crisis (GFC) of 2008-2009, there has been a surge in the macroeconomics literature on aggregate uncertainty. Although the recent literature has recognized adverse real effects of global uncertainty shocks in EMEs, the role of monetary policy in mitigating these effects is...

Observers have relied increasingly on simple reaction functions, such as the Taylor rule, to assess the conduct of monetary policy. Applying this approach to deflationary or near-zero inflation environments is problematic, however, and this paper examines two shortcomings of particular relevance...

Inflation persistence in U.S. data can be characterized by a vector autocorrelation function relating inflation and deviations of output from trend. This paper shows that a flexible-price general equilibrium business cycle model with money and a central bank using an interest rate target can...

We estimate the response of interest rates to inflation using data for 18 developed countries since 1915, within 30-year moving windows. Until 1972, interest rates are virtually insensitive to inflation. From then on, the interest-rate response to inflation starts to rise, and monetary policy...

The parameters of the Taylor rule relating interest rates to inflation and other variables are not identified in new-Keynesian models. Thus, Taylor rule regressions cannot be used to argue that the Fed conquered inflation by moving from a passive to an active policy in the early 1980s

The new-Keynesian, Taylor-rule theory of inflation determination relies on explosive dynamics. By raising interest rates in response to inflation, the Fed does not directly stabilize future inflation. Rather, the Fed threatens hyperinflation or deflation, unless inflation jumps to one particular...

This paper analyzes India's monetary policy reaction function in the framework of the Taylor-type rule. The analysis uses quarterly data from the period 1997 Q1 to 2020 Q2. The study indicates the highly smooth interest rate changing behavior of the RBI. The estimation of the policy reaction...

This paper attempts to better understand the monetary policy decisions under the Belgian two-tier foreign exchange market during the Bretton-Woods system. Whereas this type of market organisation aimed at insulating the domestic currency from (speculative) capital flows, it is questioned whether...

This article presents a reconstruction of the history of Colombia´s central bank´s (Banco de la Republica) monetary policy between 1990 and 2010, during which explicit inflation targeting was adopted by October of 2000. To do so we developed a theoretical modified Taylor rule with interest...