Working Paper

Stability of steady states in a model of pleasant monetarist arithmetic

Abstract: In this paper the authors study the stability properties of the alternative steady-state equilibria that arise in a neoclassical production model that delivers pleasant monetarist arithmetic. They show that if the government?s monetary policy rule involves a fixed money supply growth rate, then ?pleasant arithmetic? steady states?steady states from which a permanent increase in the money growth and inflation rates is associated with a permanent decrease in the real interest rate and a permanent increase in the level of output?are dynamically stable.

Bibliographic Information

Provider: Federal Reserve Bank of Atlanta

Part of Series: FRB Atlanta Working Paper

Publication Date: 2001

Number: 2001-20