TY  - JOUR
AU  - McCallum,Bennett T.
TI  - Multiple-Solution Indeterminacies in Monetary Policy Analysis
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9837
PY  - 2003
Y2  - July 2003
UR  - http://www.nber.org/papers/w9837
L1  - http://www.nber.org/papers/w9837.pdf
N1  - Author contact info:
Bennett T. McCallum
Tepper School of Business, Posner 256
Carnegie Mellon University
Pittsburgh, PA 15213
Tel: 412/268-2347
Fax: 412/268-6830
E-Mail: bm05@andrew.cmu.edu
AB  - This paper discusses four current topics in monetary policy analysis, each of which hinges on the possibility of multiple solutions in rational expectations (RE) models. In three of these cases--involving inflation forecast targeting, the zero-lower bound deflation trap, and the fiscal theory of the price level--analysis based on E-stability and adaptive learnability of the solutions suggests that only one of them is a viable equilibrium candidate. Thus the dangers alleged to prevail, in these cases, are not ones with which actual policymakers need to be concerned. In the case of the Taylor principle, by contrast, policy behavior that violates the principle is genuinely undesirable, since all of the RE equilibria fail to be learnable.
ER  -