TY  - JOUR
AU  - Gali,Jordi
AU  - Lopez-Salido,J. David
AU  - Valles,Javier
TI  - Rule-of-Thumb Consumers and the Design of Interest Rate Rules
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10392
PY  - 2004
Y2  - March 2004
UR  - http://www.nber.org/papers/w10392
L1  - http://www.nber.org/papers/w10392.pdf
N1  - Author contact info:
Jordi Gali
Centre de Recerca en Economia Internacional (CREI)
Ramon Trias Fargas 25
08005 Barcelona
SPAIN
Tel: 011-34-93-5422754
Fax: 011-34-93-5421860
E-Mail: jgali@crei.cat

Javier Valles
Research Dept.
Banco de Espana
Alcala 50
28014 Madrid SPAIN
E-Mail: jvalles@presidencia.gob.es
AB  - We introduce rule-of-thumb consumers in an otherwise standard dynamic sticky price model, and show how their presence can change dramatically the properties of widely used interest rate rules. In particular, the existence of a unique equilibrium is no longer guaranteed by an interest rate rule that satisfies the so called Taylor principle. Our findings call for caution when using estimates of interest rate rules in order to assess the merits of monetary policy in specific historical periods.
ER  -