Erschienen in:FRB of Chicago Working Paper ; No. WP-2018-3
Umfang:
1 Online-Ressource (26 p)
Sprache:
Englisch
Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments 2018-02-05 erstellt
Beschreibung:
We examine the standard New Keynesian economy’s Ramsey problem written in terms of instrument settings instead of allocations. Its standard formulation makes two instruments available: the path of current and future interest rates, and an “open mouth operation� which selects one of the many equilibria consistent with the chosen interest rates. Removing the open mouth operation by imposing a finite commitment horizon yields pathological policy advice that relies on the model's forward guidance puzzle