Constant Interest Rate Projections without the Curse of Indeterminacy

11 Pages Posted: 7 Nov 2007

See all articles by Jordi Galí

Jordi Galí

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI); Massachusetts Institute of Technology (MIT) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: August 2007

Abstract

Constant interest rate (CIR) projections are often criticized on the grounds that they are inconsistent with the existence of a unique equilibrium in a variety of forward-looking models. This note shows how to construct CIR projections that are not subject to that criticism, using a standard New Keynesian model as a reference framework.

Keywords: Interest rate peg, inflation targeting, conditional forecasts, interest rate rules, multiple equilibria

JEL Classification: E37, E58

Suggested Citation

Gali, Jordi, Constant Interest Rate Projections without the Curse of Indeterminacy (August 2007). Available at SSRN: https://ssrn.com/abstract=1028223 or http://dx.doi.org/10.2139/ssrn.1028223

Jordi Gali (Contact Author)

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI) ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain
+34 93 542 2754 (Phone)
+34 93 542 1746 (Fax)

HOME PAGE: http://www.econ.upf.es/~gali

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
Cambridge, MA 02142
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
53
Abstract Views
749
Rank
681,640
PlumX Metrics