Working Paper
Forward-looking versus backward-looking Taylor rules
Abstract: This paper analyzes the restrictions necessary to ensure that the policy rule used by the central bank does not introduce real indeterminacy into the economy. It conducts this analysis in a flexible price economy and a sticky price model. A robust conclusion is that to ensure determinacy, the monetary authority should follow a backward-looking rule where the nominal interest rate responds aggressively to past inflation rates.
https://doi.org/10.26509/frbc-wp-200009
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Bibliographic Information
Provider: Federal Reserve Bank of Cleveland
Part of Series: Working Papers (Old Series)
Publication Date: 2000
Number: 0009