Super-inertial interest rate rules are not solutions of Ramsey optimal monetary policy

Pre-print, Working paper: Giannoni and Woodford (2003) found that the equilibrium determined by com- mitment to a super-inertial rule (where the sum of the parameters of lags of interest rate exceed ones and does not depend on the auto-correlation of shocks) corresponds to the unique bounded solution of Ramsey optimal policy for the new-Keynesian model. By contrast, this note demonstrates that commitment to an inertial rule (where the sum of the parameters of lags of interest rate is below one and depends on the auto-correlation of shocks) corresponds to the unique bounded solution.

Author(s)

Jean-Bernard Chatelain, Kirsten Ralf

Date of publication
  • 2018
Keywords
  • New-Keynesian model
  • Ramsey optimal policy
  • Interest rate smoothing
  • Super-inertial rule
  • Inertial rule
Internal reference
  • PSE Working Papers n°2018-43
Version
  • 1