DP7555 Estimated Interest Rate Rules: Do they Determine Determinacy Properties?

Author(s): Henrik Jensen
Publication Date: November 2009
Keyword(s): Equilibrium determinacy, Estimated Taylor rules, Interest rate rules, Monetary policy, Rules vs. discretion.
JEL(s): E52, E58
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=7555

No. I demonstrate that econometric estimations of nominal interest rate rules may tell little, if anything, about an economy's determinacy properties. In particular, correct inference about the interest-rate response to inflation provides no information about determinacy. Instead, it could reveal whether optimal monetary policymaking is performed under discretion or commitment.