Super-inertial interest rate rules are not solutions of Ramsey optimal monetary policy

Jean-Bernard Chatelain (1, 2) , Kirsten Ralf (3)

1 PSE - Paris School of Economics
2 PJSE - Paris Jourdan Sciences Economiques
3 ESCE – International Business School

Giannoni and Woodford (2003) found that the equilibrium determined by com- mitment to a super-inertial rule (where the sum of the parameters of lags of interest rate exceed ones and does not depend on the auto-correlation of shocks) corresponds to the unique bounded solution of Ramsey optimal policy for the new-Keynesian model. By contrast, this note demonstrates that commitment to an inertial rule (where the sum of the parameters of lags of interest rate is below one and depends on the auto-correlation of shocks) corresponds to the unique bounded solution.

Mots clés: New-Keynesian model; Ramsey optimal policy; Interest rate smoothing; Super-inertial rule; Inertial rule

Domaines: Economies et finances

Jean-Bernard Chatelain, Kirsten Ralf. Super-inertial interest rate rules are not solutions of Ramsey optimal monetary policy. 2018. ⟨halshs-01863367⟩