Optimal Interest-Rate Rules in a Forward-Looking Model , and In fl ation Stabilization versus Price-Level Stabilization ∗

@inproceedings{Giannoni2000OptimalIR,
  title={Optimal Interest-Rate Rules in a Forward-Looking Model , and In fl ation Stabilization versus Price-Level Stabilization ∗},
  author={Marc P. Giannoni},
  year={2000}
}
This paper characterizes the properties of various interest-rate rules in a basic forwardlooking model. We compare simple Taylor rules and rules that respond to price-level fluctuations (called Wicksellian rules). We argue that by introducing an appropriate amount of history dependence in policy, Wicksellian rules perform better than optimal Taylor rules in terms of welfare, robustness to alternative shock processes, and are less prone to equilibrium indeterminacy. A simple Wicksellian rule… CONTINUE READING