Determinacy of interest rate rules with bond transaction services in a cashless economy
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Canzoneri and Diba (2004) show that the Taylor principle is not a panacea for equilibrium determinacy in a model where bonds and money provide liquidity services to households. We consider a cashless New Keynesian model with two types of government bonds. One bond provides transaction services, whereas the other is used only as a store of value. We show that the Taylor principle is still sacrosant. In general, the results of Leeper (1991) are confirmed.
Research subject Economics
IdentifiersURN: urn:nbn:se:su:diva-27653OAI: oai:DiVA.org:su-27653DiVA: diva2:216722