KAEA Macro VSS
Time: Thursday, Mar. 9 8:00PM Eastern Time (10:00AM Friday in Korea)
Speaker: Yunjong Eo (Korea University)
“Determinacy and E-Stability with Interest Rate Rules at the Zero Lower Bound ” (w/ Nigel McClung)
We evaluate and compare alternative interest rate rules, namely average inflation targeting, price level targeting, and traditional inflation targeting rules, in a standard New Keynesian model that features recurring, transient zero lower bound regimes. We use determinacy and expectational stability (E-stability) of equilibrium as the criteria for stabilization policy. We find that price level targeting policy, including nominal GDP targeting as a special case, most effectively promotes determinacy and E-stability among the policy frameworks, whereas standard inflation targeting rules are prone to indeterminacy. Average inflation targeting can induce determinacy and E-stability effectively, provided the averaging window is sufficiently long.
Meeting ID: 997 3660 7978