Monetary policy, Taylor¿s Rule and Endogenous Fluctuations

• Autores: Alfonso Palacio Vera, Luis Alberto Alonso González
• Localización: Documentos de trabajo de la Facultad de Ciencias Económicas y Empresariales, ISSN-e 2255-5471, Nº. 19, 1999, 19 págs.
• Idioma: español
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• Resumen

  • The paper analyses the dynamic behaviour of an economy when the central bank (CB) implements an inflation targeting regime. For this purpose, a simple macroeconomic model is constructed and subjected to formal dynamic analysis. A first result is that, under certain conditions, the emergence of endogenous oscillations in the economy is a possible scenario. A second implication is that CBs face two main policy dilemmas: (i) the degree of gradualism adopted when setting the level of short-term interest rates and (ii) the desirability or otherwise of raising interest rates as soon as economic indicators suggest the emergence of inflationary pressures.