Constant Interest Rate Projections without the Curse of Indeterminacy
11 Pages Posted: 7 Nov 2007
Date Written: August 2007
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: Suggested Citation